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2015 (9) TMI 1106 - AT - Income TaxTDS Liablity - fees for technical services - whether the Architectural services rendered by M/s. Andy Fisher Workshop Pte. Ltd., Singapore and Interior designing and Architectural services rendered by M/s. FBEYE International Pte. Ltd., Singapore are taxable u/s. 9(1)(vii)(b) of Income Tax Act, 1961 and also under Article 12(iv)(c) of India Singapore DTAA? - Held that - Where in rendering of any service there is no transfer of technology, technical know-how or any technical knowledge or skill that assessee cannot apply in furtherance of his business objects, the payments for same in our opinion does not fall within the scope of fees for technical services . Once, the payments are held not to be in the nature of fees for technical services there is no point in travelling to the next step to ascertain whether they are exempt in view of DTAA between the two countries or not. Since, we have held that the payments made to Singapore parties are not in the nature of royalties or fees for technical services , we are of the opinion that no purpose would be served by referring to Article 12 of India-Singapore DTAA to see whether such payments are taxable or exempt. Assessee was not required to deduct tax on the impugned payments - Decided in favour of assessee. Condonation of delay - revenue challenged condoning of delay by Commissioner of Income Tax (Appeals) in filing of appeal u/s. 248 - Held that - The Commissioner of Income Tax (Appeals) observed that there is no negligence or laxity on part of the assessee in preferring appeal, the delay was caused because of wrong advice given by the professionals. It is a well settled law that condonation of delay should be a rule and denial an exception. It is not the length of delay which matters but the reason for delay in filing of the appeal which is of prime importance. The Courts have been taking liberal view in condoning substantial delay where the delay has been explained. On the other hand, minor delay in filing of the appeal is not pardoned where it has not been sufficiently explained or delay is attributable to utter negligence or lackadaisical attitude of appellant. The Commissioner of Income Tax (Appeals) after taking into consideration the reasons and circumstances causing delay has condoned the delay. We do not deem appropriate to interfere with the same. - Decided against revenue.
Issues Involved:
1. Taxability of "Architectural services" and "Interior designing and Architectural services" under section 9(1)(vii)(b) of the Income Tax Act, 1961 and Article 12(iv)(c) of the India-Singapore DTAA. 2. Condonation of delay in filing the appeal under section 248. 3. Requirement of deducting tax on payments made to foreign consultants from Thailand under the India-Thailand DTAA. 4. Examination of whether the consultancy services constituted a Permanent Establishment under Article 5(2)(j) of the India-Thailand DTAA. 5. Taxability of income from consultancy services as business income under Article 7 or as technical services under Article 22 of the India-Thailand DTAA. Detailed Analysis: 1. Taxability of Services under Section 9(1)(vii)(b) and Article 12(iv)(c) of India-Singapore DTAA: The Commissioner of Income Tax (Appeals) held that the payments made to Singapore entities for architectural and interior designing services fall within the ambit of 'fees for technical services' as per section 9(1)(vii)(b) of the Income Tax Act and Article 12(iv)(c) of the India-Singapore DTAA. The Tribunal examined the agreements and concluded that the designs and plans were project-specific and did not transfer any technical know-how or technology that could be used in other projects. The Tribunal emphasized that the copyright of the documents and drawings remained with the Singapore consultants, indicating no transfer of technology. Thus, the payments did not qualify as 'fees for technical services' under the DTAA. Consequently, the appeals filed by the assessee were allowed. 2. Condonation of Delay in Filing Appeal: The Commissioner of Income Tax (Appeals) condoned the delay in filing the appeal under section 248, attributing the delay to wrong advice from professionals and finding no negligence on the part of the assessee. The Tribunal upheld this decision, noting that the courts should adopt a liberal approach in condoning delays, especially when the delay is explained satisfactorily and is not due to negligence or inaction. The Tribunal cited the Supreme Court's decision in Ram Nath Sao Vs. Gobardhan Sao, emphasizing that the acceptance of delay should be the norm, and refusal an exception. 3. Requirement of Deducting Tax on Payments to Thai Consultants: The Commissioner of Income Tax (Appeals) concluded that payments to Thai consultants were not taxable in India under the India-Thailand DTAA, as there was no specific article dealing with fees for technical services. The Tribunal referred to a similar case (Dy. Director of Income Tax Vs. Sparsh Infratech) where it was held that in the absence of a specific provision for fees for technical services in the DTAA, such payments could not be taxed under a residual clause like Article 22. The Tribunal affirmed that the beneficial provisions of the DTAA should prevail, and since the DTAA did not cover fees for technical services, the payments were not taxable in India. 4. Examination of Permanent Establishment: The Revenue argued that the consultancy services provided by Thai entities constituted a Permanent Establishment (PE) under Article 5(2)(j) of the DTAA. However, the Tribunal found no evidence suggesting that the Thai consultants had a PE in India or that they were present in India for more than 183 days. Certificates submitted by the Thai firms showed that their employees were in India for significantly shorter periods. Therefore, the Tribunal concluded that the Thai entities did not have a PE in India, and the payments could not be taxed as business income under Article 7 of the DTAA. 5. Taxability under Article 7 or Article 22 of the DTAA: The Revenue contended that the payments should be considered business income under Article 7 or other income under Article 22 of the DTAA. The Tribunal reiterated that in the absence of a PE, the payments could not be taxed as business income under Article 7. Additionally, invoking Article 22 was not justified, as fees for technical services could not be classified as miscellaneous income. The Tribunal upheld the CIT(A)'s decision that the payments were not taxable under the DTAA provisions. Conclusion: The Tribunal allowed the appeals filed by the assessee, holding that the payments to Singapore entities were not taxable as fees for technical services. The Tribunal dismissed the appeals filed by the Revenue, affirming that the payments to Thai consultants were not taxable under the India-Thailand DTAA, and the delay in filing the appeal was rightly condoned.
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