9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 76 - AT - Income TaxIncome accrued in India - taxability of receipt towards Infrastructure and Hosting Data Centre (IDC) charges by treating it as royalty - India Singapore DTAA - assessee is a company incorporated in Singapore and is engaged in provision of services relating to developing, marketing and implementing incentive based strategies and technologies to build loyalty and to reward long-term relationships through the utilization of the internet, wireless technology and offline solutions to its clients - During the previous year relevant to the assessment year under dispute, the assessee provided three different categories of services to its three Indian group companies on payment basis - HELD THAT - As decided in assessee's own case for 2010 11 2020 (7) TMI 644 - ITAT MUMBAI we hold that the amount received by the assessee from provision of IDC services cannot be treated as royalty either under the provisions of the Act or under India Singapore DTAA, hence, cannot be taxed at the hands of the assessee. Taxability receipt towards management services fee by treating it as fees for technical services (FTS) - HELD THAT - As relying on assessee own case 2020 (7) TMI 644 - ITAT MUMBAI management fee received by the assessee cannot be treated as FTS under Article 12(4) of the India Singapore Tax Treaty. Therefore, we hold that the amount received by the assessee towards management fee is not taxable at the hands of the assessee. This ground is allowed. Taxability of receipt referral fee by treating it as royalty and FTS - HELD THAT - As decided in own case 2020 (7) TMI 644 - ITAT MUMBAI revenues under the referral agreement is not taxable in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA or FTS under the India-Singapore DTAA - we hold that the amount received by the assessee not being in the nature of royalty or FTS either under the Act or under the tax treaty, is not taxable at the hands of the assessee. This ground is allowed.
Issues Involved:
1. Taxability of IDC charges as royalty. 2. Taxability of management services fee as fees for technical services (FTS). 3. Taxability of referral fee as royalty and FTS. 4. Levy of education and secondary and higher education cess. 5. Short grant of TDS. 6. Short grant of interest under section 244A. Issue-Wise Detailed Analysis: 1. Taxability of IDC Charges as Royalty: The assessee, a Singapore-based company, received ?1,86,50,124/- towards Infrastructure and Hosting Data Centre (IDC) charges from its Indian group companies. The Assessing Officer (AO) treated these payments as royalty under Article 12(3)(a) and 12(3)(b) of the India-Singapore DTAA, arguing that the services involved sophisticated IT infrastructure and access to a Central Processing Unit (CPU) in Singapore. The Dispute Resolution Panel (DRP) upheld this view. However, the Tribunal, referencing its decision in the assessee's own case for previous assessment years, concluded that the IDC services did not constitute royalty. The Tribunal noted that the IDC services were standard and did not involve the transfer of any software rights or confidential information. Hence, the payment for IDC services was not taxable as royalty under the DTAA. 2. Taxability of Management Services Fee as FTS: The assessee received ?1,31,83,758/- for providing management and consultancy services to its Indian group company. The AO categorized these payments as FTS under Section 9(1)(vii) of the Income Tax Act and Article 12 of the India-Singapore DTAA, arguing that the services involved equipping employees with core management skills. The DRP upheld this view. However, the Tribunal, referencing its previous decision, held that the management services did not make available any technical knowledge, skill, or know-how to the Indian company. Therefore, the management fee was not taxable as FTS under the DTAA. 3. Taxability of Referral Fee as Royalty and FTS: The assessee received ?1,08,56,405/- as referral fee from its Indian group company for referring global clients. The AO treated this payment as royalty, arguing that it involved the transfer of rights or information. The DRP upheld this view. However, the Tribunal, referencing its previous decision, held that the referral services did not involve the transfer of any technical knowledge or rights. The referral fee was not considered royalty or FTS under the DTAA and was not taxable. 4. Levy of Education and Secondary and Higher Education Cess: Given the Tribunal's decisions on the above issues, the question of levy of education and secondary and higher education cess became academic and was not adjudicated. The Tribunal kept the issue open for future deliberation if it arises in another appeal. 5. Short Grant of TDS: The assessee raised the issue of short grant of TDS. The Tribunal directed the AO to verify the relevant facts and allow credit for TDS as per the provisions of the Act. 6. Short Grant of Interest under Section 244A: The assessee also raised the issue of short grant of interest under Section 244A. The Tribunal directed the AO to verify the relevant facts and allow interest on the refund as per the provisions of the Act. Conclusion: The Tribunal partly allowed the appeal, holding that the payments received for IDC services, management services, and referral fees were not taxable as royalty or FTS under the India-Singapore DTAA. The issues of short grant of TDS and interest under Section 244A were remanded to the AO for verification and appropriate action.
|
