2020 (11) TMI 867 - AT - Income Tax

Income accrued in India - Taxability of certain receipts by the assessee as Fees for technical services within the meaning of Article 12 of India-Sweden DDTAA read with India-Portugal DTAA (via Protocol) - HELD THAT - Assessee rendered IT support services but could not furnish proof of correct nature of services with the help of any Agreement etc. The assessee only furnished copies of cf services. This iertain invoices before the authorities below which did not facilitate the correct determination of the nature ossue anent to Walter Tools India Pvt. Ltd. and Dormer Tools India Pvt. Ltd. came up for consideration before the Tribunal for the A.Y. 2013-14 wherein the matter stood remitted to the file of the AO for fresh determination of nature of services. Similar view has been reiterated by the Tribunal in its order for A.Ys. 2014-15 and 2015-16. A copy of this order is available at page 19 onwards of paper book. Since the facts and circumstances of the nature of receipt from three Indian entities in this year are admittedly similar to those of two entities in preceding years, respectfully following the precedent, we set aside the impugned order and remit the matter to the file of the AO for a fresh determination of the issue in accordance with the directions given by the Tribunal for the preceding years.

Summary

Issues:
Taxability of receipts as "Fees for technical services" under India-Sweden Double Taxation Avoidance Agreement (DTAA) and India-Portugal DTAA.

Detailed Analysis:
1. The appeal concerns the taxability of certain receipts by a non-resident company incorporated in Sweden for IT support services provided to Indian entities. The Assessing Officer (AO) treated the receipts as "Fees for technical services" under the Income-tax Act, 1961, and Article 12 of the DTAA based on an agreement with one Indian entity. The Dispute Resolution Panel (DRP) had previously held that such services were not taxable. The Tribunal examined the nature of services and found that similar issues had been decided in favor of the assessee in earlier years, concluding that the receipts were not chargeable to tax under the DTAA, even though they qualified as "Fees for technical services" under the Act.

2. The Tribunal also considered receipts from three other Indian entities for IT support services. The AO included these amounts in the total income of the assessee, citing a lack of evidence regarding the nature of services. The Tribunal noted that similar issues had been remitted to the AO for fresh determination in preceding years. Following this precedent, the Tribunal set aside the impugned order and remitted the matter to the AO for a fresh determination in line with previous directions.

3. In conclusion, the Tribunal partially allowed the appeal, holding that the receipts from the Indian entities for IT support services should be re-evaluated by the AO based on previous directions. The judgment emphasizes the importance of establishing the true nature of services rendered to determine taxability under the DTAA and the Income-tax Act.