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2023 (3) TMI 912 - AT - Income TaxIncome deemed to accrue or arise in India - benefit of India - UK DTAA to the assessee by the A.O. - Reference to incorporation, domicile or place of management or on other conditions - HELD THAT - It is observed that the assessee s case for A.Y. 2011-12 2017 (2) TMI 779 - ITAT MUMBAI , the co-ordinate bench has held that the assessee is entitled to the benefits of India - UK DTAA by following the previous year s decision of the Tribunal in the case of Linklaters LLP 2017 (2) TMI 779 - ITAT MUMBAI Taxability of LLP or its partners - A.O. has held that as per UK laws, LLP is not a taxable entity and since the assessee is not liable to tax and only its partners are assessed to tax, the assessee cannot be given the benefit of the Tax Treaty - No doubt that the firm consists of Partners and the income of the firm are taxed in the hands of the partners, the assessee is also said to be incorporated and registered under the laws of UK. Other than the fact that the assessee has not paid tax, we have observed from the orders of the DRP and the A.O. that there is no detailed analysis as to why the said benefit is to be denied to the assessee. There has been no discussion neither in the DRP s order nor in the assessment order explaining why the income of the assessee is to be taxed in India. In the absence of such analysis, we are inclined to follow the decision of the Tribunal in assessee s case for earlier years which has held that the assessee was entitled to India - UK tax treaty benefits - we allow ground raised by the assessee. Income taxable in India - FTS - Whether the invoice raised by the assessee is in the nature of fees for technical services as defined under Article 13(4)(c) of India UK DTAA? - assessee contends that the A.O. has given a factually inaccurate finding that the co-ordinate bench in assessee s case has held the impugned amount to be taxable in India as per the DTAA - HELD THAT - Tribunal in A.Y. 2013-14 and 2015-16 2010 (7) TMI 535 - ITAT, MUMBAI held that the Revenue has failed to prove otherwise that the same pertain to fees for technical services - provisions of India-UK DTAA would override the provisions of the Act, thereby holding the remuneration received by the assessee for providing legal services as not amounting to fees for technical services , where the provisions of section 9(1)(vii) of the Act is not applicable - the revenue has failed to prove that the same would fall under the category of fee for technical services as envisaged in Article 13 of the India-UK DTAA and thereby holding that the same cannot be brought to tax as FTS as per section 90(2) of the Act. We are inclined to follow the said decisions, as the Revenue even during the impugned year has failed to controvert the contention of the assessee.- we allow ground raised by the assessee. Permanent establishment in India - period of stay in India - HELD THAT - As assessee do not have a permanent establishment in India during the impugned year. As the period of stay of the employees of the assessee for rendering the services in India was only for 17 days and only when it amounts to 90 days or more, the assessee is said to have a permanent establishment in India as mandated by law. Liability to be taxed in India under Article 15 India-UK DTAA - whether only Article 7 was applicable in assessee s case and not Article 15? - HELD THAT - As decided in in the assessee s case 2018 (9) TMI 1741 - ITAT MUMBAI impugned amount of fee received by the assessee would not be liable to be taxed under Article 15 of India-UK DTAA As this issue has already been dealt with by the Tribunal extensively in the previous years, the same is also applicable for the impugned year as there is no change in facts for this year. Tribunal has reiterated that Article 15 of India-UK DTAA is dealt with only for taxability of independent personnel services or independent activity of similar character and not for the assessee which is a partnership firm. Appeal filed by the assessee is allowed. Accrual of income - Reimbursement of expenses treated as income - India-Singapore tax treaty - HELD THAT - As decided in case in Linklaters LLP 2017 (2) TMI 779 - ITAT MUMBAI reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark up, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses. 'There is thus no good reason to make any addition to income in respect of these reimbursements of expenses. The action of the CIT(A), as rightly contends, is on pure surmises and conjectures - delete the disallowance of expenses as sustained by, the CIT(A) and hold that no part of reimbursements of expenses received by the assessee on the facts of this case, be treated as income of the assessee. Decided in favour of assessee.
Issues Involved:
1. Entitlement to the benefit of India-UK Double Taxation Avoidance Agreement (DTAA). 2. Nature of income as 'fees for technical services' under Article 14(4)(c) of the DTAA. 3. Existence of a permanent establishment in India. 4. Taxability of income in India under Article 7(1) of DTAA in the absence of a permanent establishment. 5. Applicability of Article 15 of India-UK DTAA to the assessee. Issue-wise Detailed Analysis: 1. Entitlement to the Benefit of India-UK DTAA: The assessee argued that it was entitled to the benefits of the India-UK DTAA as it was a resident of the UK, liable to tax there by reason of incorporation, domicile, or place of management. The assessee relied on the Supreme Court decision in Union of India vs. Azadi Bacho Andolan, which distinguished 'liable to taxation' from 'pays tax', and on the OECD Model Tax Convention. The Tribunal observed that in previous years, the assessee was granted DTAA benefits, and there was no detailed analysis by the AO or DRP to deny these benefits. Therefore, the Tribunal followed its earlier decisions and allowed the assessee's claim for DTAA benefits. 2. Nature of Income as 'Fees for Technical Services': The AO had taxed the income as 'fees for technical services' under Article 13(4)(c) of the India-UK DTAA, relying on various judicial decisions. The assessee contended that the services rendered were not technical but professional legal services, which did not 'make available' any technology to the clients. The Tribunal, following its decisions for earlier years, held that the income did not qualify as 'fees for technical services' and was not taxable under Article 13 of the DTAA. The Tribunal allowed the related grounds raised by the assessee. 3. Existence of a Permanent Establishment in India: The assessee contended that it did not have a permanent establishment in India as its personnel were present in India for less than 90 days during the relevant year. The Tribunal noted that in previous years, this issue was remanded to the AO for factual verification. For the current year, the Tribunal observed that the personnel were present in India for only 17 days, and thus, the assessee did not have a permanent establishment in India. The Tribunal allowed the related grounds. 4. Taxability of Income in India under Article 7(1) of DTAA: The Tribunal held that in the absence of a permanent establishment in India, the assessee's income could not be taxed in India under Article 7(1) of the DTAA. This conclusion followed from the finding that the assessee did not have a permanent establishment in India. 5. Applicability of Article 15 of India-UK DTAA: The assessee argued that Article 15, which deals with independent personal services, applied only to individuals and not to partnership firms. The Tribunal agreed, noting that Article 15 was applicable only to individuals and not to the assessee, which was a partnership firm. The Tribunal followed its earlier decisions and allowed the related grounds. Separate Appeal - ITA No. 1257/Mum/2021: This appeal involved similar issues under the India-Singapore DTAA. The Tribunal applied the same reasoning as in ITA No. 1256/Mum/2021 and allowed the appeal, holding that the income did not qualify as 'fees for technical services', the assessee did not have a permanent establishment in India, and Article 15 of the India-Singapore DTAA did not apply to the assessee. Conclusion: Both appeals filed by the assessee were allowed. The Tribunal consistently followed its earlier decisions, granting the assessee the benefits of the relevant DTAAs, and concluding that the income was not taxable in India under the provisions cited by the AO.
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