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(c) that regarding the contention of the assessee the TPO has found all the transaction to be at arm's length and hence the conditions laid down in article 9(1) are not satisfied, the Ld. DR submitted that the TPO's order was constrained by the disclosure made before him by the assessee and TPO's order did not capture more than 40 elements, which constituted 'the condition in terms of Article 9(1) 'from the FAR analysis presented before him. The AO vividly captured these 40 elements which is brought on record due to 2 surveys carried out by the AO and ITO (TDS), respectively. Otherwise, the applicability of article 9 would depend on whether any adjustment to ALP is made, even though the transaction are made every year with the same AEs, which would not be a rational interpretation.

55. Consequently, while deploying the ‗nexus' test to examine the justification of a classification under a treaty like the DTAA, the line of enquiry cannot possibly be whether the classification has nexus to the object of the ‗statute' for the purposes of Article 14 of the Constitution of India, but whether the classification brought about by Section 40 (a) (i) of the Act defeats the object of the DTAA.

56. The argument of the Revenue also overlooks the fact that the condition under which deductibility is disallowed in respect of payments to non-residents, is plainly different from that when made to a resident. Under Section 40 (a) (i), as it then stood, the allowability of the deduction of the payment to a non-resident mandatorily required deduction of TDS at the time of payment. On the other hand, payments to residents were neither subject to the condition of deduction of TDS nor, naturally, to the further consequence of disallowance of the payment as deduction. The expression ‗under the same conditions' in Article 26 (3) of the DTAA clarifies the nature of the receipt and conditions of its deductibility. It is relatable not merely to the compliance requirement of deduction of TDS. The lack of parity in the allowing of the payment as deduction is what brings about the discrimination. The tested party is another resident Indian who transacts with a resident making payment and does not deduct TDS and therefore in whose case there would be no disallowance of the payment as deduction because TDS was not deducted. Therefore, the consequence of non-deduction of TDS when the payment is to a nonresident has an adverse consequence to the payer. Since it is mandatory in ITA No. 7/2007 Page 31 of 35 terms of Section 40 (a) (i) for the payer to deduct TDS from the payment to the non-resident, the latter receives the payment net of TDS. The object of Article 26 & 5483/Del/2014 (3) DTAA was to ensure non-discrimination in the condition of deductibility of the payment in the hands of the payer where the payee is either a resident or a non-resident. That object would get defeated as a result of the discrimination brought about qua non-resident by requiring the TDS to be deducted while making payment of FTS in terms of Section 40 (a) (i) of the Act.