DTAA residency and section 234B interest: treaty benefits follow taxable status in Germany, with no interest leviable under precedent.

An entity can qualify as a resident of Germany under the India-Germany DTAA where the evidence shows it is treated as a taxable unit in Germany and liable to tax there, including support from a German tax residency certificate and trade tax returns. On that basis, Article 12(2) benefits for royalty and fees for technical services are available, and OECD commentary cannot override the treaty position established on the facts. Interest under section 234B is not leviable where the issue is covered by binding precedent.

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Issues: (i) Whether the respondent was entitled to be treated as a resident of Germany for the purposes of the India-Germany Double Taxation Avoidance Agreement and thereby claim the benefit of Article 12(2); (ii) Whether interest was chargeable under section 234B of the Income-tax Act, 1961.

Issue (i): Whether the respondent was entitled to be treated as a resident of Germany for the purposes of the India-Germany Double Taxation Avoidance Agreement and thereby claim the benefit of Article 12(2).

Analysis: The respondent received royalty and fees for technical services in India. The Agreement applied to German trade tax, and the definition of "person" and "resident" under the Agreement covered an entity treated as a taxable unit in Germany and liable to tax there. The German tax resident certificate and the finding that the respondent was filing trade tax returns supported the conclusion that it was a taxable entity under German law. The treaty could not be denied by relying only on OECD commentary where the evidence established liability to tax under the Agreement.

Conclusion: The respondent was entitled to be treated as a resident of Germany for the purposes of the Agreement and was entitled to the benefit of Article 12(2), in favour of the assessee.

Issue (ii): Whether interest was chargeable under section 234B of the Income-tax Act, 1961.

Analysis: The issue was covered by the binding decision of the Court in Director of Income Tax (International Taxation) v. NGC Network Asia LLC.

Conclusion: No interest was chargeable under section 234B, in favour of the assessee.

Final Conclusion: The Revenue's appeal failed on both questions, and the assessment of treaty entitlement and the non-applicability of section 234B stood undisturbed.

Ratio Decidendi: Where an entity is shown on evidence to be treated as a taxable unit and liable to tax under the laws of the treaty partner State, treaty residency and corresponding DTAA benefits cannot be denied by reference to extraneous commentary, and interest under section 234B is not leviable where the issue is covered by binding precedent.

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