Case Law Details
RELEVANT PARAGRAPH
3. The applicant contends that the services under various contracts except contract no. 5 cannot be brought within the sweep of `royalties’ as defined in Art. XII.3 of the Double Taxation Avoidance Agreement (hereinafter referred to as `DTAA’ or `Treaty’), that there was no permanent establishment in India except in relation to Contract no.6 and that royalty income in respect of the contract no. 5 has to apportioned in such a manner that only income attributable to the Indian operations is taxed in India. Though initially in the application the applicant conceded to pay tax at 15 per cent on the royalty income under Contract no. 5, the above contention was raised drawing support from the decision of the Supreme Court in Ishikawajima – Harima Heavy Industries Ltd. v. DIT [268 ITR 408].
5. First we shall address the question whether the receipts earned by the applicant under various contracts are in the nature of royalties as defined in Art. XII.3 of DTAA between India and Australia. The relevant extracts of para 3 are given below:
“3. The term “royalties” in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for :
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