FTS payment for earning income from outside India - No clause in DTAA taxability explained

Facts:

Assessee was in the business of Engineering, Procurement and Construction (EPC) Contracts relating to infrastructure facilities in and outside India. Arising out of a project in Uganda, certain payments for design of foundation of structural drawings etc. were made to a UAE entity on which no TDS was made but was claimed as an expense. Revenue disallowed for want of TDS deduction holding that the payment was royalty for designs. Subsequently it was confirmed that these were not royalty but fee for technical services only (FTS). Plea of the assessee was the payments were made for earning a source of income outside India in Uganda. Thus the exclusion clause provided in Section 9(1)(vii)(b) will apply for the FTs. There is no FTS clause in the Indo-UAE DTAA thus no income can arise in India in the absence of a PE as per Article 7 of the DTAA as well. On appeal CIT(A) agreed with the views of the assessee. On further appeal by the revenue -

Held against the revenue that the payment was FTS and was for earning a source of Income outside India and thus was within the exclusion clause of Section 9(1)(vii). Order of CIT(A) required no interference.

Applied:

If there is no clause in DTAA then the other income clause or business profits clause need to be seen for taxability at best -

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