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2018 (7) TMI 126 - AT - Income TaxReceipts to tax in India u/s (9)(1)(i) - income accrued to India - taxability of receipts u/s 44BB - Indo UAE DTAA - Held that - Merely because the assessee had taken same alternative plea without prejudice to the main contention, the same cannot be held against the assessee as there is no estoppel in law. For this proposition, we draw support from the decision of the Hon ble Delhi High Court in the case of CIT Vs. Bharat General Re-insurance Co. ltd 1970 (12) TMI 5 - DELHI HIGH COURT and HCL Technologies Vs. ACIT 2015 (4) TMI 841 - DELHI HIGH COURT . Hon ble Uttarakhand High Court in the case of CIT Vs.Enron Espat Services Inv. 2009 (9) TMI 565 - UTTARKHAND HIGH COURT has categorically held that if the receipt by a non-resident is exempt from tax under the relevant DTAA, the said amount cannot be brought to tax u/s 44BB - thus hold that receipts of the non residents are not taxable in India u/s 9(1)(i) of the Act under the treaty - Decided in favour of assessee.
Issues:
1. Taxability of receipts under section 9(1)(i) of the Income Tax Act, 1961. 2. Applicability of Double Taxation Avoidance Agreement (DTAA) provisions. 3. Taxability of receipts as fees for technical services under section 9(1)(vii) r.w.s 115A of the Act. 4. Alternative contention for taxability under section 44BB of the Act. Issue 1: Taxability of receipts under section 9(1)(i) of the Income Tax Act, 1961: The case involved contracts with non-resident entities for services rendered outside India. The Assessing Officer deemed a portion of the receipts as taxable in India under section 9(1)(i) due to the situs of the contract being in India. However, it was argued that since no operations were carried out in India, the receipts were not taxable. The Appellate Tribunal held that if a non-resident's receipt is exempt under the relevant DTAA, it cannot be taxed under section 44BB of the Act. Citing judicial precedents, the Tribunal ruled that the receipts were not taxable in India under section 9(1)(i) due to the treaty provisions. Issue 2: Applicability of Double Taxation Avoidance Agreement (DTAA) provisions: In the second appeal, the question was whether receipts from a non-resident entity for certification services were taxable in India as fees for technical services under section 9(1)(vii) r.w.s 115A of the Act. The assessee argued that under the India-USA DTAA, the receipts were not taxable in India. The Tribunal, relying on previous decisions, held that since the services were rendered outside India and the non-resident entity did not have a Permanent Establishment in India, the receipts could not be taxed in India under the DTAA. Issue 3: Taxability of receipts as fees for technical services under section 9(1)(vii) r.w.s 115A of the Act: The Assessing Officer had brought the receipts for certification services to tax as fees for technical services. However, the Tribunal, following precedent and considering the absence of a Permanent Establishment in India, ruled that the receipts could only be taxed under the DTAA provisions as business profit if attributable to a Permanent Establishment in India. As the non-resident entity did not have a PE in India, the receipts were not taxable under the DTAA. Issue 4: Alternative contention for taxability under section 44BB of the Act: In both appeals, the assessee made alternative contentions for taxability under section 44BB of the Act. The Tribunal, after considering the arguments and relevant case law, allowed the appeals, concluding that the receipts were not taxable in India under section 9(1)(i) and DTAA provisions, and thus, the alternative contention for taxability under section 44BB was not applicable. The appeals were allowed in favor of the assessee. In conclusion, the Appellate Tribunal ruled in favor of the assessee in both appeals, holding that the receipts from non-resident entities were not taxable in India under the Income Tax Act and the relevant Double Taxation Avoidance Agreements. The Tribunal emphasized the importance of treaty provisions and the absence of Permanent Establishment in India for determining the taxability of receipts from non-residents.
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