Appeal allowed for re-examination of services under DTAA provisions.

The appeal was allowed for statistical purposes, directing the Assessing Officer to re-examine the issue based on the nature of services provided by the Associated Enterprise and the Double Taxation Avoidance Agreement provisions. The Tribunal emphasized the importance of analyzing services in relation to DTAA provisions to determine taxability, noting that the tax authorities had not properly considered the definitions of "Royalty" and "Fee for technical services" under the DTAA.

---

---

Issues:
1. Disallowance u/s 40(a)(i) of the Income-tax Act, 1961 for non-deduction of tax at source on payment to Associated Enterprise (A.E.).
2. Nature of payment made to A.E. - Fee for technical services or Royalty.
3. Application of Double Taxation Avoidance Agreement (DTAA) between India and Sweden.
4. Examination of services provided by A.E. and taxability of payments under DTAA.

Analysis:
1. The appellant challenged the decision of the Ld. CIT(A) confirming the addition made by the A.O. u/s 40(a)(i) of the Act for not deducting tax at source on a payment to its A.E. The A.O. issued a show cause notice regarding the disallowance, to which the assessee responded citing coverage under the India-Sweden DTAA, stating the payment was not royalty or fee for technical services. However, the A.O. disallowed the amount, and the Ld. CIT(A) upheld the disallowance.

2. The Ld. CIT(A) determined the payment as Fee for technical services, referring to a Karnataka High Court judgment. The Ld. CIT(A) directed disallowance of the payment for non-compliance with TDS provisions, considering it as fees for technical services or payment for software purchase. The appellant contended that the payment was for common infrastructure facilities, not software, and should not be categorized as royalty or fee for technical services.

3. The Ld. A.R. argued that the services were for common infrastructure facilities, not software purchase, and thus, not subject to TDS under DTAA. The Ld. A.R. also claimed the Ld. CIT(A) enhanced the disallowance without proper notice and mentioned a Supreme Court judgment overturning the High Court decision.

4. The Tribunal noted that the nature of services and agreement between the parties were not examined by tax authorities. It emphasized the importance of analyzing services vis-à-vis DTAA provisions to determine taxability. The Tribunal found that the tax authorities did not properly consider the definitions of "Royalty" and "Fee for technical services" under DTAA, requiring a fresh examination by the A.O. The appeal was allowed for statistical purposes, directing the A.O. to re-examine the issue based on the nature of services provided by the A.E. and DTAA provisions.

---