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February 2015

DTAA between India and Denmark-Section 9(1) (vi)-A. Y. 1991-92: Income deemed to accrue or arise in India-Danish company supplying equipment and information regarding installation of such equipment-Consideration received is not royalty-Not assessable in India

By K. B. Bhujle Advocate
Reading Time 2 mins
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DIT vs. Haldor Topsoe; ; 369 ITR 453 (Bom):

Under an agreement between a Danish company and an Indian company, the Danish company supplied equipment and information regarding installation of such equipment. For the A. Y. 1991-92, the Danish company claimed that its income consequent on the agreement was not taxable in India. The Assessing Officer rejected the claim. The Tribunal accepted the claim and held that the payments were not covered within the expression “royalty” provided u/s. 9(1)(vi) of the Income-tax Act, 1961, which was much wider than the one provided in the DTAA between India and Denmark.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) The equipment was supplied to the Indian party for which the Indian party made payment. The contract included stipulations for giving all information so as to guide the Indian party to install the equipment at site and thereafter to use it.

ii) In these circumstances, this was a mixed question and finding of fact had been rendered considering the peculiar facts and circumstances. The finding of fact was a possible one. There was no perversity or error of law apparent on the face of the record. The payments were not assessable in India.”

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