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of <h1>ITAT rules in favor of appellant, directs AO to delete Rs. 2,75,23,613 addition based on DTAA interpretation.</h1> <h3>AUSTRIA MICRO SYSTEMS INTERNATIONAL AG. Versus INCOME TAX OFFICER.</h3> AUSTRIA MICRO SYSTEMS INTERNATIONAL AG. Versus INCOME TAX OFFICER. - TTJ 085, 760, Issues:Taxability of sum received from Semiconductor Complex Ltd. in India under the IT Act, 1961 and the Indo-Austrian Double Taxation Avoidance Agreement (DTAA).Analysis:Issue 1: Taxability under the IT Act, 1961The appellant received a sum of Rs. 2,75,23,613 from Semiconductor Complex Ltd. for supplying products and services. The Assessing Officer (AO) considered this sum as income arising from the transfer of technology, leading to tax liability in India. The AO relied on judgments to support the taxability of the sum. The CIT(A) upheld the AO's decision, stating that the income was taxable in India due to a business connection. However, the ITAT Bombay-E highlighted the importance of the Indo-Austrian DTAA in determining tax liability. The ITAT emphasized that the provisions of the DTAA override those of the IT Act if they are more favorable to the assessee. The ITAT concluded that since the appellant's case succeeded under the DTAA, there was no need to analyze the IT Act provisions further.Issue 2: Taxability under the Indo-Austrian DTAAThe ITAT examined the provisions of the Indo-Austrian DTAA, specifically focusing on Article 7, which stated that amounts paid for technical services are taxable only in the country where the services are performed. The ITAT found no evidence to suggest that any technical services were rendered in India. The services were to be provided in Austria, as per the agreement terms. Therefore, the ITAT concluded that the authorities erred in taxing the sum as fees for technical services in India. Additionally, the ITAT analyzed the nature of the sum received as export proceeds, determining it to be industrial or commercial profits. According to Article 3(1) of the DTAA, such profits can only be taxed in India if they are attributable to a permanent establishment in India, which was not the case for the appellant. Consequently, the ITAT held that the appellant was not liable to pay tax in India on the profits earned from exporting the products and services.Conclusion:The ITAT allowed the appeal, directing the AO to delete the addition of Rs. 2,75,23,613. The decision was based on the ITAT's interpretation of the Indo-Austrian DTAA provisions, which favored the appellant and eliminated the need to consider the IT Act provisions further. The ITAT emphasized the importance of DTAA provisions in determining tax liability in international transactions.
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