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2019 (5) TMI 1535 - AT - Income TaxTDS u/s 195 - Royalties and fees for technical services - Addition u/s 40(a)(ia) - Service Fees Paid to Ouotec Ovi and Consultancy charges paid to International Projects Services OY and Outotec Research OY - duration of stay of such residents of Finland in India - Taxability under the India-Finland DTAA - PE In India - HELD THAT - As decided in assessee's own case 2015 (7) TMI 475 - ITAT DELHI Once it is held that five individuals from Finland were not representing IPS and, in fact, there was no valid agreement between the assessee and IPS, then, what remains to be examined is such five residents of Finland on individual basis. The amounts payable to each of such five persons satisfying the duration test on individual basis would enable the ultimate triggering of Article 15 of the DTAA. Facts being identical, respectfully following the precedent, we set aside the orders of the lower authorities and remand the matter back to the file of the Assessing Officer for adjudicating the same afresh in the light of the aforesaid decision of the Tribunal in the case of the assessee itself for assessment year 2009-10 - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Disallowance under Section 40(a)(i) of the Income Tax Act, 1961 for payment of management service fees to Outotec Oyj. 2. Classification of the payment of management service fees as technical services under Article 13(4)(c) of the Indo-Finland Tax Treaty. 3. Disallowance under Section 40(a)(i) for payment of consultancy fees to International Project Services OY and Outotec Research OY. 4. Classification of consultancy fees as technical services under Article 13(4)(c) of the Indo-Finland Tax Treaty. 5. Interpretation of the "make available" clause in Article 13(4)(c) of the Indo-Finland Tax Treaty. Issue-wise Detailed Analysis: 1. Disallowance under Section 40(a)(i) for Payment of Management Service Fees to Outotec Oyj: The assessee paid ?95,95,363 to Outotec Oyj as management service fees without deducting tax at source. The Assessing Officer (AO) disallowed this payment under Section 40(a)(i) of the Income Tax Act, 1961, citing that the payment was chargeable to tax in India and the assessee failed to deduct TDS as required under Section 195 of the Act. 2. Classification of Payment as Technical Services under Article 13(4)(c) of the Indo-Finland Tax Treaty: The AO concluded that the payment to Outotec Oyj fell within the purview of technical services as per Article 13(4)(c) of the Indo-Finland Tax Treaty. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, stating that the services provided by Outotec Oyj made available technical knowledge, experience, skill, know-how, or processes to the assessee. 3. Disallowance under Section 40(a)(i) for Payment of Consultancy Fees to International Project Services OY and Outotec Research OY: The assessee also paid ?6,89,025 and ?4,81,308 to International Project Services OY and Outotec Research OY, respectively, as consultancy fees without deducting tax at source. The AO disallowed these payments under Section 40(a)(i) for the same reasons as above, which was upheld by the CIT(A). 4. Classification of Consultancy Fees as Technical Services under Article 13(4)(c) of the Indo-Finland Tax Treaty: The AO and CIT(A) similarly concluded that the consultancy fees paid to International Project Services OY and Outotec Research OY also fell within the definition of technical services under Article 13(4)(c) of the Indo-Finland Tax Treaty. 5. Interpretation of the "Make Available" Clause in Article 13(4)(c) of the Indo-Finland Tax Treaty: The assessee argued that the services did not make available any technical knowledge, skill, know-how, or processes to them, and therefore, the payments should not be classified as fees for technical services under the treaty. The CIT(A) disagreed, stating that the services provided indeed made available technical knowledge to the assessee, thus falling within the definition of fees for technical services. Tribunal's Decision: The Tribunal noted that a similar issue was decided in favor of the assessee for the assessment year 2009-10, where it was held that the services did not make available any technical knowledge, skill, know-how, or processes to the assessee. Respecting this precedent, the Tribunal set aside the orders of the lower authorities and remanded the matter back to the AO for fresh adjudication in light of the Tribunal's decision for the assessment year 2009-10. Conclusion: The Tribunal directed the AO to re-examine the matter, considering the Tribunal's previous decision that the services did not make available technical knowledge and thus did not fall within the definition of fees for technical services under the Indo-Finland Tax Treaty. The appeal was allowed for statistical purposes.
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