2023 (6) TMI 1124 - AT - Income Tax

Income deemed to accrue or arise in India - amount received by the assessee towards provision of Management Support Services to be in the nature of Fees for Technical Services FTS under Article 12 of the India Singapore DTAA - whether services provided by the assessee do not make available any technical knowledge, skill, know-how to the recipient ? HELD THAT - As in A.Ys 2013-14 and 2014-15 2023 (3) TMI 1187 - ITAT DELHI , with respect to taxability of Management Support cost, under Article 12(4)(b) of the DTAA held as facts show that the agreements for user of brand name and for Management Support Services are independent of each other, hence, not connected or dependent upon each other. It is also relevant to observe, while the license agreements for user of brand name are with various third party hotels in India, the agreement for provision of Management Support Services is with the Indian subsidiary. Therefore, it cannot be said that the amount received from provision of Management Support Services is ancillary and subsidiary to the license agreement. A threadbare analysis of Management Support Services Agreement and the fee received under various heads in pursuance to such agreement, in assessee s own case in assessment year 2012-13 2021 (10) TMI 443 - ITAT DELHI has given a categorical finding that it does not come under Article 12(4) of India-Singapore DTAA. The decision of the Co-ordinate Bench as aforesaid, will also apply mutatis-mutandis to this appeal. Thus we direct the Assessing Officer to delete the impugned addition. Short credit of TDS - The assessee is entitled for credit of TDS as per provisions of section 199 of the Act r.w.r 37BA(2) of the Rules. We, therefore, direct the Assessing Officer to grant credit of TDS as per relevant provisions of the law and rules.

Summary

Issues Involved:
The judgment involves the treatment of amount received by the assessee as Fees for Technical Services (FTS) under India-Singapore Double Taxation Avoidance Agreement (DTAA) and the entitlement of the assessee for credit of Tax Deducted at Source (TDS).

Issue 1: Treatment of Amount Received as FTS under DTAA:
The appeal addressed the treatment of the amount received by the assessee from Inter Continental Hotels Group (IHGAP) towards provision of Management Support Services as Fees for Technical Services under Article 12 of the India-Singapore DTAA. The Assessing Officer added the management services cost to the income of the assessee, treating it as FTS. However, the assessee contended that the services provided did not make available any technical knowledge, skill, or know-how to the recipient, as per previous tribunal decisions in the assessee's favor. The co-ordinate bench held that the services provided by the assessee were not in the nature of FTS under the DTAA, and thus directed the Assessing Officer to delete the impugned addition in both appeals.

Issue 2: Entitlement for Credit of TDS:
The second common grievance in both appeals related to the short credit of Tax Deducted at Source (TDS). The Tribunal found that the assessee was entitled to credit of TDS as per the provisions of section 199 of the Income Tax Act read with rule 37BA(2) of the Rules. Consequently, the Tribunal directed the Assessing Officer to grant credit of TDS as per the relevant provisions of the law and rules.

In conclusion, the Appellate Tribunal ITAT Delhi ruled in favor of the assessee on both issues. The Tribunal held that the amount received by the assessee for Management Support Services was not to be treated as Fees for Technical Services under the India-Singapore DTAA, based on previous tribunal decisions. Additionally, the Tribunal directed the Assessing Officer to grant the assessee credit for Tax Deducted at Source in accordance with the relevant provisions of the law and rules.