Law:

Section:

Section 90 of the Income-tax Act, 1961 read with article III of the Double Taxation Avoidance Agreement between India and Sweden - Double Taxation Relief - Where agreement exists - Assessment year 1988-89 - Whether under article III(3) of DTAA between India and Sweden, management charges, whether relating to business management or technical management, are not to be treated as commercial profits and, therefore, they would be outside scope of exemption under article III of DTAA - Held, yes - Assessee was a Swedish company - It had entered into an agreement with Videsh Sanchar Nigam Limited (VSNL) to render consultancy services in implementation of India-U.A.E. Submarine Cable System Project - Part (a) of said agreement related to planning and technical studies and part (b) related to supervising overall testing and commissioning activities - In relevant assessment year, VSNL paid to assessee supervision charges for carrying out work as per part (b) of agreement - Assessee claimed that said amount represented technical service fees which was to be treated as commercial profits under article III(1) of DTAA and, thus, was exempt from income-tax - Whether since under part (b) of agreement assessee was also to manage or supervise installation of terminal equipments as well as commissioning activities, fee payable in respect of said activities was nothing but management fee which is specifically excluded from purview of industrial and commercial profits as per article III(3) of DTAA - Held, yes - Whether, therefore, technical supervision charges received by assessee were outside scope of DTAA and were taxable under Act - Held, yes FACTS The assessee was a Swedish company. It had entered into an agreement with Videsh Sanchar Nigam Limited (VSNL) to render consultancy services for implementation of India-U.A.E. Submarine Cable System Project. Part (a) of the said agreement related to planning and technical studies prior to placing turnkey contract with the submarine system manufacturers and part (b) of the agreement related to supervising installation of all terminal equipments and the cables in the terminal buildings and also to supervise the overall testing and…

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