Allowing the appeal of the assessee the Tribunal held that , one time payment of affiliation fee to US company which did not provide technical knowledge or use of technical knowledge cannot be assessed as royalty either under the Act as well as under DTAA. Not liable to deduct tax at source hence no disallowance can be made . ( AY.2006 -07)
Customer Lab Solutions (P.) Ltd. v. ITO (2018) 171 ITD 552 / 170 DTR 225/ 195 TTJ 841 (Hyd) (Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source -Non-resident – Royalty – Fes for technical services – Income deemed to accrue or arise in India-Affiliation fee-One time payment to US. company, which did not provide for transfer of technology cannot be assessed as royalty –Not liable to deduct tax at source -No disallowance can be made – DTAA-India- USA [ S.9(1)(vi) ,195 ,Art .12 ]