9911796707
TMI Blog2015 (2) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The learned AO/ Hon'ble Dispute Resolution Panel ('DRP') has erred in concluding that borrowed service rendered by the Appellant are in the nature of 'royalty' under Article 7 of the India-Greece Double Taxation Avoidance Agreement ('India-Greece Tax Treaty'). 2. The Hon'ble DRP's order and finding on the evidence submitted is contrary to the details filed before the learned AO and is also contrary to the record and order of the DRP. 3. The learned AO/ Hon'ble DRP has erred in not following the earlier decisions pronounced by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility, is a foreign company incorporated in Greece. The assessee had entered into international transaction with its associate concern, McKinsey and company INC India Branch during the financial year relevant to the A.Y. 2011-12. The assessee has provided assistance in the form of borrowed service to McKinsey India, in consideration for which, the assessee received an amount of Rs. 50,103/- from the Indian company. The said income was not offered for tax by the assessee in the return of income as the said income was earned in the course of business of the assessee and therefore, it qualify as business profits under Article 3 of Indian-Greece DTAA. Since the assessee does not have any permanent establishment (PE) in India and therefore, its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DTAA is also not applicable. Just because the treaty is silent on the particular type of income, it cannot be said that such income will be automatic qualified as business income. Under these circumstances, the provisions of the Indian Income Tax Act have to be considered and applied. Thus, the services rendered by the assessee company are clearly taxable as 'fees for technical services' u/s 9(1)(vii). 4. Before us, learned senior counsel, Shri Porus Kaka submitted that there is no FTS clause in the Indo-Greece DTAA and therefore, such an income if at all can be taxed as business income under Article 3. However, such a business income can be taxed as business income under Article 3, only when assessee has a permanent establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 3 of Indo-Greece DTAA. Since, such a business profit can only be taxed as is attributable to the permanent establishment, therefore, in this case when there is no permanent establishment the said business income cannot be taxed in India. On the other hand department's case is that Article 17 provides that the domestic law will govern the assessment and taxation of income wherever, there is no provision in the treaty, accordingly, the said income is to be taxed as FTS under section 9(1)(vii) of the Indian Income-tax Act. A bare perusal of Article 17 makes it abundantly clear that it deals with residual items of income which are not covered by any of the articles of the treaty. However, in this case the assessee has earned income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered only within the ambit of Article 7 of the DTAA. As the assessee is a tax resident of Thailand, the business profits can. be taxed in India only if the enterprise carries on business in India through a Permanent Establishment (PE) situated in India. As it is not the case of the A.O. that the assessee has a PE in India, the amount of income would fall under Article 7 but cease to be taxable in India because of the absence of the PE. 9. Whichever way we may view the income, the opinion of the authorities below of including it under Article 12 or under Article 22 is not sustainable. The amount falls under Article 7 as 'Business profits' and is hence not chargeable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is this mode of computation, which needs to be followed notwithstanding any contrary provision contained in the Act. However, if there is no specific provision in the DTA concerning a particular aspect, then it is the basic law, that is, the Act, which applies. As we are dealing with a situation in which India has entered into a DTAA with Thailand and the nature of receipt is covered under Article 7 but in the present circumstances it is not chargeable to tax in India, patently the consideration of the provisions of the Act is ruled out. We, therefore, overturn the impugned order on this issue and hold that the amount in question is not includible in the total income of the assessee." Since, similar provisions are appearing in Indo-Greec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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