2014 (2) TMI 1280 - AT - Income Tax

Borrowed service rendered treated as fee for technical services - India-Singapore Tax Treaty - Held that - We noted that these issues have already been decided by this Tribunal in the various decisions as mentioned above in the group concerns of the assessee before us. Against the decision of the Tribunal, the revenue filed the appeals before the Hon ble High Court in 14 cases. Those 14 appeals were withdrawn by the revenue. Department has resolved that the issue under MAP and consequently withdrawn the appeals filed before the Hon ble High Court. Further, the assessee has filed a letter dated 12/02/2014 thereby stated that the issue relating to taxability of firm function charges does not arise in case of these three appeals and the only issue involved in these appeals is the taxability of borrowed service charges, which has been decided in favour of the assessee under the Mutual Agreement Procedure. Also when the issues involved in these appeals have already resolved under the Mutual Agreement Procedure, we direct the AO to grant the relief accordingly to the assessee after verification of fact that the issues have already been resolved under the Mutual Agreement Procedure. - decided in favour of assessee

Summary

Issues Involved:
Appeals against assessment orders under Income-tax Act for Assessment Year 2006-07 and 2007-08 regarding borrowed service treated as fee for technical services.

Analysis:

1. The primary issue in this case pertains to whether borrowed services rendered by the assessee are to be treated as 'fees for technical services' under the India-Singapore Double Taxation Avoidance Agreement. The appeals raised concerns about the conclusions drawn by the AO and DRP, arguing that the borrowed services should not be categorized as taxable technical services. The appellant contended that previous decisions by the ITAT in similar cases favored their position, emphasizing that borrowed service charges were not taxable as 'fees for included services'.

2. The appellant's counsel referenced multiple decisions by the ITAT in cases involving group companies of the assessee to support their argument. They highlighted that the Indian Branch's payment to the head office for borrowed service charges had been accepted under the Mutual Agreement Procedure (MAP) resolution, indicating that the charges were not taxable. Additionally, the counsel pointed out that the revenue's appeals challenging the ITAT decisions were withdrawn following a High Court order, further reinforcing the resolution of the issue under MAP.

3. Upon reviewing the submissions and relevant records, the Tribunal noted that similar issues had been previously addressed and decided in favor of the assessee in various cases involving group concerns. The revenue had withdrawn appeals filed before the High Court in 14 cases related to the same issues, as they were resolved under MAP. The Tribunal emphasized that the department's withdrawal of appeals indicated the resolution of the matter, as confirmed by the High Court's order.

4. Considering the precedents set by previous decisions and the resolution of similar issues under MAP, the Tribunal directed the Assessing Officer to grant relief to the assessee accordingly. The Tribunal acknowledged the appellant's assertion that the taxability of borrowed service charges had been settled under the Mutual Agreement Procedure, leading to the allowance of the appeals in favor of the assessee.

In conclusion, the Tribunal allowed the appeals, emphasizing the resolution of the taxability issue concerning borrowed service charges under the Mutual Agreement Procedure, as supported by previous decisions and the revenue's withdrawal of appeals before the High Court.