2023 (7) TMI 454 - AT - Income Tax

Income accrued in India - receipt from offshore sale of goods - rendering supporting services - AO treated the amount received by the assessee company as fees for included services as per Article 12 of India-Ireland DTAA also Fees for Technical Services as per Sec. 9(1) (vii) - Whether impugned amount received for rendering of services? - HELD THAT - As noticed that in the invoices the description of sale of equipment number of quantity, price of the item sold and detail of the buyer to whom shipment of goods were provided which demonstrate that assessee had received the amount on sale of equipment and nowhere it was mentioned that any amount was received from rendering of any services. In this regard, we find that A.O has not established that how the amount received by the assessee was related to rendering of any services by the assessee. A.O/DRP have not controverted the facts established from the invoices on sale of equipments as discussed supra in this order. A.O has also not brought on record any clinching evidences to substantiate that assessee has received the impugned amount for rendering of services. Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves issues related to the final assessment order passed by the Assessing Officer for the assessment year 2018-19, including the treatment of receipts from offshore sale of goods as fees for technical services, interest levied under sections 234A and 234B of the Income-tax Act, short credit of taxes deducted at source, and initiation under section 270A of the Act.

Issue 1: Final Assessment Order

The appeal was filed against the final order passed by the Assessing Officer for the assessment year 2018-19. The appellant raised grounds challenging the assessment order under sections 143(3) and 144C(13) of the Income-tax Act, contending that it was prejudicial and bad in law. The appellant argued that the assessing officer erred in treating the receipts from offshore sale of goods as fees for technical services, which was incorrect as evidenced by the invoices and purchase orders submitted.

Issue 2: Treatment of Offshore Sale of Goods

The assessing officer treated the receipts of INR 13,27,84,057 from offshore sale of goods as fees for technical services under section 9(1)(vii) of the Act and the India-Ireland Double Taxation Avoidance Agreement. The appellant contended that no services were rendered in India, and the revenue was solely from offshore sales. The tribunal found that the assessing officer failed to establish any evidence linking the revenue to services rendered, and the invoices clearly indicated the sale of equipment without any mention of service fees.

Issue 3: Interest and Tax Credit

The assessing officer levied interest under sections 234A and 234B of the Act, and the appellant raised objections regarding the short credit of taxes deducted at source. The tribunal dismissed the grounds related to interest levied and short credit of taxes as being of a consequential nature.

Issue 4: Initiation under Section 270A

The assessing officer initiated proceedings under section 270A of the Act, which was challenged by the appellant. However, the tribunal did not provide detailed discussion on this issue in the judgment.

Conclusion:
The tribunal partly allowed the appeal of the assessee, specifically on the grounds related to the treatment of receipts from offshore sale of goods as fees for technical services. The tribunal found that the assessing officer's decision was not justified as there was no evidence to support the claim that the revenue was derived from services rendered. Other grounds related to interest levied and tax credit were dismissed as being of a consequential nature.