2023 (5) TMI 1296 - AT - Income Tax

Accrual of income in India - Sale of logistic services and global account manager expenses received - assessed as Fees for Technical Services ( FTS ) under the Act as well as India-USA DTAA - HELD THAT - Revenue has not disputed the fact that the Coordinate Bench of the Tribunal for the preceding AY(s) 2022 (1) TMI 1290 - ITAT DELHI , 2020 (10) TMI 654 - ITAT DELHI have decided the issues in favour of the assessee wherein held the issues in question are no longer res-integra and has consistently been decided in favour of the assessee in preceding AYs. Addition on account of sale of logistic services treating the same as FTS under the Act as well as India-USA DTAA - The Coordinate Bench of the Tribunal in its decision 2022 (11) TMI 125 - ITAT DELHI for AY 2018-19 where held that the amount received by the assessee from freight/logistic support services cannot be treated as FTS/FIS either under the Act or under treaty provisions. Accordingly, the addition was deleted. Identical view was expressed by the Tribunal while deciding the appeals for subsequent assessment years, as noted above. In fact, though, the departmental authorities were conscious of the fact that the Tribunal has decided the issue in favour of the assessee in earlier assessment years, however, for the purpose of keeping the issue alive, a contrary decision has been taken. There being no change either in the factual or legal position relating to the disputed issue in the impugned assessment year, respectfully following the consistent view of the Tribunal in assessee s own case in the preceding assessment years, as mentioned above, we delete the addition made by the assessing officer. Addition of reimbursement of global account management charges received by the assessee treating the same as FTS under the Act as well as India-USA DTAA - The Coordinate Bench of the Tribunal in its decision 2022 (11) TMI 125 - ITAT DELHI for AY 2018-19 observed that the issue has been consistently decided in favour of the assessee in all these years, while holding that the amount received towards reimbursement of global account management charges is not in the nature of FTS/FIS. Addition of reimbursement of lease line charges received treating the same as royalty under the Act as well as India-USA DTAA - Tribunal in its decision 2022 (11) TMI 125 - ITAT DELHI AY 2018-19 held that lease line charges are not in the nature of royalty - As the payment made, being not in the nature of royalty, no disallowance under section 40(a)(i) of the Act can be made. Assessee appeal allowed.

Summary

Issues Involved:
The appeal challenges the final assessment order under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the Assessment Year 2020-21, specifically disputing the treatment of various receipts as Fee for Technical Services/Fee for Included Services (FTS/FIS) and royalty under the India-USA Double Taxation Avoidance Agreement (DTAA), along with the imposition of interest and initiation of penalty proceedings.

Grounds of Appeal:
1. The appeal challenges the correctness of the assessment order under the Income Tax Act, alleging errors in fact and law.
2. Dispute arises regarding the treatment of fee for freight/logistic support services as FTS/FIS under section 9(1)(vii) of the Act and the DTAA.
3. Issue arises concerning the classification of reimbursement of Global Account Management charges as FTS/FIS.
4. The assessment includes lease line charges as royalty under Explanation 2 to section 9(1)(vi) of the Act and the DTAA.
5. Interest under section 234A of the Act is contested.
6. Interest under section 234B of the Act is disputed.
7. Penalty proceedings under section 270A of the Act are challenged for lack of adequate satisfaction.

Judgment Details:

Issue 2 - Fee for Freight/Logistic Support Services:
The Coordinate Bench of the Tribunal consistently decided in favor of the assessee, holding that the amount received for logistic services cannot be treated as FTS/FIS under the Act or the DTAA. The addition was deleted based on past decisions, with no change in factual or legal position.

Issue 3 - Global Account Management Charges:
Similarly, the Tribunal found that reimbursement of global account management charges is not in the nature of FTS/FIS, aligning with previous decisions in favor of the assessee. The addition was deleted based on consistent rulings.

Issue 4 - Lease Line Charges:
Regarding lease line charges, the Tribunal held that they are not royalty based on past decisions. Despite the assessing officer's disallowance under section 40(a)(i) of the Act, the Tribunal ruled in favor of the assessee, deleting the addition.

The Tribunal noted that all issues challenged by the assessee were consistently decided in its favor in preceding AYs, with no change in facts or circumstances. As the Revenue failed to present any contrary precedent or new evidence, the Tribunal decided in favor of the assessee on all disputed grounds.

Grounds 5 and 6, relating to interest levies, were deemed consequential, while ground 7 regarding penalty proceedings was considered premature and not adjudicated. Consequently, the appeal of the assessee was allowed, with the judgment pronounced on 2nd May, 2023.