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TMI Blog2017 (3) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... n treating professional fees paid to Mahta Partners, LLC USA, a non resident and holding that the said payment requires deduction of Tax at Source U/s 195 / 195 9A) and Honourable CIT(A) has erred in law and on facts in confirming the same, disregarding the submissions made by the appellant. 3. Briefly stated, the relevant material facts are as follows. During the relevant financial period, the assessee made a payment of US $ 1,20,000 to a US based entity by the name of Mehta Partners LLC. This payment was made on account of professional fee for global biopharmaceutical strategic counselling and advisory services rendered by this entity. The assessee did not deduct any tax at source from the payment so made, on the ground that the income embedded therein was not taxable in India in view of the provisions of India USA Double Taxation Avoidance Agreement [(1991) 187 ITR (87) 102]. The Assessing Officer was, however, of the view that the services rendered by the US entity are covered by the definition of royalty under Explanation 2 to Section 9(1)(vi) as also under Article 12 (3)(a) and, accordingly, tax should have been deducted at source @ 10%. On this basis, tax withholding liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of time. The information has an element of its own commercial and industrial experience and can be termed as royalty under section 9(1)(vi) of the Act Explanation 2 sub-clause (iv). Accordingly it can be said that the income is deemed to accrue arise in India. Further the wordings of in the definition of royalty are similar in Article 12(3) of the India-USA DTAA. The same discussion holds good for treaty also. Accordingly the remittance made can be termed as royalty under the Act as well as DTAA. Thus, the remittance to Mehta Partners LLC is covered by the definition of 'Royalties' as per Article 12.3 of India-USA Tax Treaty and the contention of the AO is upheld. As the payment received by Mehta partners LLC, USA is taxable as 'Royalties' as per the provisions of the IT Act and that of as per DTA between India and USA, appellant should have deducted tax in accordance with the provisions of section 195 of the Act while remitting the sum, which the appellant has failed and therefore the AO has rightly held the appellant as 'assessee in default' within the meaning of section) 201(1) of the Act. The ground of appeal is therefore dismissed." 4. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services. 3. The term "royalties" as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof ; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8. 4. For purposes of this Article, "fees f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for included services was incurred, and such royalties or fees for included services are borne by such permanent establishment or fixed base, then such royalties or fees for included services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. (b) Where under sub-paragraph (a) royalties or fees for included services do not arise in one of the Contracting States, and the royalties relate to the use of, or the right to use, the right or property, or the fees for included services relate to services performed, in one of the Contracting States, the royalties or fees for included services shall be deemed to arise in that Contracting State. 8. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for included services paid exceeds the amount which would have been paid in the absence of such relationship, the provisions of this Article sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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