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TMI Blog2019 (4) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... f Indo-Spain DTAA as well and, therefore, the payment made by the assessee to the Spanish company for fabric testing would not constitute fee for technical services and consequently, section 195 of the Act has no application to such a receipt. With this view of the matter, we find it difficult to sustain the addition and accordingly, direct the learned AO to delete the same. - Decided in favour of assessee - ITA No.231/Del/2016 - - - Dated:- 27-3-2019 - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER For The Assessee : Ms. Lalita Krishna Murthi, CA For The Department : Shri N.K. Bansal, Sr. DR ORDER PER NARASIMHA K. CHARY, JM Aggrieved by the order dated 12.11.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of the failure, the same invites rigors of Section 40(a)(ia) of the Act. On this premise, learned AO disallowed the expenditure and added it back to the income of the assessee. 4. Aggrieved by the said addition, assessee preferred an appeal before the learned CIT(A). Learned CIT(A) noticing Article 13 of the Indo Spain DTAA and in view of Section 3 thereof held that Fee for Technical Services means payments of any kind to any person other than payments to an employee of the person making the payments and, therefore, this amounts to royalty attracting Section 195 of the Act Learned CIT(A), therefore, while placing reliance on the decision in the case of Steria (India) Ltd., (2014) 364 ITR 381 (AAR) held that the assessee cannot co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two sovereign nations on the basis of treaties with other countries. He justified the orders of the authorities below on the ground that the make available clause is not to be found in the Indo-Spain Treaty and, therefore, the receipts in the hands of Aitex has to be charged in India and consequently, Section 195 is attracted. 8. We have gone through the record. In so far as the facts are concerned, absolutely, there is no dispute. The only question is whether in view of the Protocol to India-Spain DTAA, a restrictive meaning of the Fee for Technical Services has to be read in the context of Indo- Spain DTAA or not. Clause 7 of the Protocol to Indo-Spain DTAA reads as under: ARTICLE 7 BUSINESS PROFITS 1. The profits of an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other similar expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the taxation laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents, know-how or other rights, or by way of commission or other charges, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five years from the date of its entry into force. However, if under any Convention or Agreement between India and a third State which is a Member of the OECD, which enters into force after 1-1-1990, India limits its taxation at source on royalties or fees for technical services to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of incomes, the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention with effect from the date on which the present Convention comes into force or the relevant Indian Convention or Agreement, whichever enters into force later. 10. The India-UK Treaty was entered into for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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