2023 (1) TMI 1173 - AT - Income Tax

Income deemed to accrue or arise in India - CIT(A) treating the amount as non taxable in India, on the ground that the services were rendered outside India - Whether assessee had failed to fulfill all conditions as laid down in clause (b) of section 9(1)(vi) of the I. T. Act - CIT(A) s action in issue reversing the assessment findings holding the assessee s receipts in issue as taxable in India despite the fact that it had rendered the corresponding services in USA only - HELD THAT - Fact remains that the assessee has not rendered any services in India itself forms the most clinching aspect for us to follow our earlier above extracted order deciding the issue against the department. It is made clear that the Revenue s pleadings nowhere pinpoint any distinction on facts or law; as the case may be, in all these three assessment years. Faced with the situation, we adopt judicial consistency to affirm both the CIT(A) s orders herein under challenge. This Revenue s identical sole substantive ground fails therefore.

Summary

Issues:
- Taxability of services rendered outside India
- Application of India-USA DTAA provisions

Analysis:

Issue 1: Taxability of services rendered outside India
The Revenue's appeals for A.Ys. 2018-19 and 2019-20 contested the CIT(A)'s treatment of amounts as non-taxable in India due to services rendered outside India. The Revenue argued that the conditions under section 9(1)(vi) of the Income Tax Act were not met and that the services were taxable in India. The tribunal noted that in a previous assessment year, a similar issue was decided in favor of the assessee based on detailed discussions by the CIT(A) and the nature of services provided by the appellant. The tribunal emphasized that income accrues where services are rendered, and in this case, the services were provided in the USA, making the income non-taxable in India. Additionally, the tribunal highlighted that the services did not involve the transfer of technical knowledge or know-how, as required under the India-USA DTAA, further supporting the non-taxability of the income in India.

Issue 2: Application of India-USA DTAA provisions
The tribunal examined the applicability of the India-USA DTAA provisions in determining the taxability of the income. It was established that the services provided did not meet the criteria outlined in Article 12(4) (b) of the DTAA, which requires services to make technical knowledge available to the recipient. The tribunal referenced previous decisions and emphasized that the recipient must be independently able to use the technical know-how provided by the service provider for the income to be taxable. As the services in question did not meet this criterion, the tribunal affirmed the CIT(A)'s findings and held the amount in issue as non-taxable in India. The tribunal dismissed the Revenue's appeals, maintaining consistency with previous decisions and upholding the non-taxability of the income based on the specific circumstances and legal provisions involved.

This comprehensive analysis of the judgment highlights the key arguments, legal interpretations, and conclusions reached by the tribunal regarding the taxability of services rendered outside India and the application of India-USA DTAA provisions in determining the tax treatment of the income in question.