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TMI Blog2022 (6) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... n India. The income which has been earned in this case in absence of F.T.S. clause in DTAA would fall as business income. Their nature would not change to be that of other income. Hence the same cannot be taxed in India in absence of a PE. Revenue appeal dismissed. - ITA No. 8010/Del./2019 - - - Dated:- 27-5-2022 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER And MS. ASTHA CHANDRA, JUDICIAL MEMBER ASSESSEE BY : NONE REVENUE BY : SHRI SANJAY KUMAR , SENIOR DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER This appeal is by the Revenue against the order of the ld. CIT (Appeals) dated 26.07.2019 for the assessment year 2016-17. 2. The Revenue has raised the following grounds of appeals:- Whether on the facts and in the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Items of income of a resident of a Contracting State, wherever arising, not expressly dealt with in the foregoing Articles may be taxed in that State. Such items of income may also be taxed in the Contracting State where the income arises. 5.2.1 It is clear that only the income which is not expressly dealt with in any of the Articles of the Treaty is required to be taxed under Article 22. In the present case, the assessee provides general, administrative, business planning and coordination services to its Indian subsidiary and charges them to the services so provided. The financial statement of the assessee also shows that income of the assessee is in fact, totally on account of such services. It is, therefore, clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not fall as miscellaneous income, the same cannot be brought under art. 22... 5.2.2 It is clear that the aforesaid judgement is clearly applicable to the assessee's case. In the absence of article on FTS, the consideration for service which is business income is automatically taxed in accordance with Article 7, which may result in no taxability in the Indian jurisdiction in the absence of a PE, which is the case of the assessee. However, this clearly implies that the income is covered under Article 7. Therefore, Article 22 has no application. 5. Against the above order, the Revenue has come up in appeal before us. 6. We have heard the ld. DR for the Revenue and perused the record. None appeared on behalf of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 of DTAA. Thus, the income received by the assessee was held to be taxable in India under sections 9(1)(vii) and 115(a)(iii) at 40 per cent of gross amount. The Commissioner (Appeals) held part amount to be taxable as royalty under article 12 and remaining amount representing additional attendance fee was held taxable under article 7, subject to the condition that assessee had a permanent establishment in India. On appeal, the Tribunal held that the portion of fees for technical services was not taxable under article 7 but under article 22, as per section 9(1)(vii). On further appeal, the High Court set aside the order of the Tribunal related to Article 22. The relevant extract of the ruling has been reproduced below: .... 20. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the treaty, then those provisions would apply to those items. Per contra, if it is found that those provisions are not applicable to those items of income, then the logical result would be that those items of income would remain in article 7 and would not go out of the same. Such items of income which do not fall under any other provision of the double tax treaty, would continue to be viewed as business profits covered by article 7. Fees for technical services is essentially business profit, since the rendering of such services is the business of the non-resident. In order to take out an item of income from the business profits, it is necessary under article 7(7) that there should be some other provision in the treaty dealing specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted by the decision of the Coordinate Bench. .... 44. In view of the above reasons, we hold that wherever under the DTAA's. Make available clause is found, then as there is no imparting, the payment in question is not 'FTS' under the Treaty and when there is no 'FTS' clause in the treaties, the payment falls under Article 7 of the Treaty and is business income. The aforesaid expositions are fully applicable here. The assessee company has no Permanent Establishment (PE) in India. The income which has been earned in this case in absence of F.T.S. clause in DTAA would fall as business income. Their nature would not change to be that of other income. Hence the same cannot be taxed in India in absence of a PE. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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