2021 (4) TMI 344 - AT - Income Tax

Income deemed to accrue or arise in India - Treatment towards IT Support services provided by the assessee to its four Indian affiliates as 'Fees for technical services' (FTS) within the meaning of Article 12 of India-Sweden Double Taxation Avoidance (hereinafter also called 'the DTAA') read with India-Portugal DTAA (via Protocol) - HELD THAT - As the authorities below have relied on their respective views taken in the assessee's own case for the assessment year 2016-17 2020 (11) TMI 867 - ITAT PUNE which has been overturned by the Tribunal, respectfully following the precedent, we hold that the amount received by the assessee from SAPL is not chargeable to tax within the meaning of Article 12 of the DTAA. Assessee also received IT support services fee from Walter Tools India Pvt. Ltd.; Seco Tools India Pt. Ltd.; and Dormer Tools India Pvt. Ltd. - AO held such amount to be chargeable to tax under Article 12 of the DTAA because the assessee could not provide the correct nature of services - we find that similar issue came up for consideration before the Tribunal for the immediately preceding assessment year. Relevant discussion has been made in para nos. 5 and 6 wherein the matter has been restored to the file of AO for fresh determination of the issue in accordance with the direction given by the Tribunal for preceding years. Insofar as the factual scenario for the year under consideration is concerned, both the sides fairly agreed that the same is identical to that for the immediately preceding assessment year, 2016-17. Respectfully following the precedent, we set-aside the impugned order on this score and remit the matter to the file of AO for a fresh determination of the nature of services offered by the assessee to Walter Tools India Pvt. Ltd.; Seco Tools India Pvt. Ltd.; and Dormer Tools India Pvt. Ltd. in the terms as given in the orders for the earlier years and thereafter determine its taxability or otherwise in law after affording due opportunity of hearing to the assessee. Assessee appeal is partly allowed.

Summary

Issues:
1. Delay in filing appeal and condonation of delay.
2. Tax treatment of IT support services as 'Fees for technical services' under the India-Sweden Double Taxation Avoidance Agreement (DTAA) and India-Portugal DTAA.

Analysis:
1. Delay in filing appeal and condonation of delay:
The appeal was filed with a delay of 166 days, which was condoned based on the Gazette of India dated 29-09-2020, extending the limitation period due to the COVID-19 pandemic. The Tribunal admitted the appeal for hearing after considering the relaxation of the limitation provided under the Gazette of India.

2. Tax treatment of IT support services under the DTAA:
The main issue revolved around the tax treatment of IT support services provided by the assessee to its four Indian affiliates as 'Fees for technical services' (FTS) under the India-Sweden DTAA. The Assessing Officer (AO) treated the receipts as FTS under section 9(1)(vii) of the Income-tax Act, 1961, and held them chargeable to tax in India. The Dispute Resolution Panel (DRP) also upheld this treatment, leading to the inclusion of specific amounts from the Indian entities as FTS under the DTAA.

3. Analysis of specific amounts received:
a. Amount received from SAPL:
The Tribunal, considering the nature of services provided and past precedents, held that the amount received from SAPL was not chargeable to tax under Article 12 of the DTAA, overturning the AO's decision based on the precedent set in the assessment year 2016-17.
b. Amounts received from other Indian entities:
For the amounts received from Walter Tools India Pvt. Ltd., Seco Tools India Pvt. Ltd., and Dormer Tools India Pvt. Ltd., the Tribunal set aside the order and remitted the matter to the AO for fresh determination of the nature of services offered by the assessee. This decision was based on the identical factual scenario to the preceding assessment year and the need for a fresh assessment based on previous directions.

In conclusion, the Tribunal partly allowed the appeal, emphasizing the importance of correctly determining the taxability of IT support services under the relevant DTAA provisions. The decision was based on a detailed analysis of the nature of services provided and past precedents, ensuring a fair and just tax treatment in accordance with the law.