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2022 (10) TMI 657 - AT - Income TaxIncome deemed to accrue or arise in India - taxability of management fees received by the assessee as fees for technical services under the provisions of the Act as well as under India Singapore Double Taxation Avoidance Agreement ( DTAA ) - HELD THAT - We find that the coordinate bench of the Tribunal in assessee s own case 2022 (7) TMI 1330 - ITAT MUMBAI decided similar issue in favour of assessee make available‟ clause in the Indo-Singapore tax treaty cannot be invoked on the facts of the present case- as no case is even made out by the revenue that as a result of rendition of these services to the Indian entity, there is any transfer of skill or technology. It is not a question of, as the learned DRP put it, enriching the service recipient, making him wiser to face similar challenges in future on his own and acquiring the skills to deal with these issues , but the test is whether the rendition of these services per se enables the recipient to provide the similar services, without recourse to the service provider, in future. An incidental benefit or enrichment which may add to the capabilities is not sufficient; the critical factor triggering the taxability in the source jurisdiction is the transfer of skills. Once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Income Tax Act, 1961, as in terms of Section 90(2), where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. - Decided in favour of assessee.
Issues Involved:
1. Taxability of management fees as fees for technical services (FTS). 2. Tax rate applicable on interest income from loans. 3. Credit for refund of earlier years. 4. Levy of interest under Section 234A of the Income Tax Act. 5. Levy of interest under Section 234B of the Income Tax Act. 6. Levy of surcharge and education cess. Detailed Analysis: 1. Taxability of Management Fees as Fees for Technical Services (FTS): The core issue in Ground No. 1 is whether the management fees received by the assessee are taxable as fees for technical services under the Income Tax Act and the India-Singapore Double Taxation Avoidance Agreement (DTAA). The assessee argued that the management fees should not be classified as FTS since no technical knowledge, experience, skill, know-how, or process was made available to Dimension Data India Private Limited, as required under Article 12 of the DTAA. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) treated the fees as FTS, but the Appellate Tribunal referred to its earlier decision in the assessee's case for the assessment year 2017-18, where it was held that the services did not make available any technical knowledge to the recipient. The Tribunal reiterated that for services to be considered as making technical knowledge available, the recipient should be able to apply the technology independently in the future, which was not the case. Therefore, the Tribunal upheld the assessee's plea and deleted the addition, allowing Ground No. 1. 2. Tax Rate Applicable on Interest Income from Loans: Ground No. 2 concerns the incorrect tax rate applied to interest income from loans. The assessee argued that the interest should be taxed at 5% as per Section 115A(1)(a)(iiaa) read with Section 194LC of the Income Tax Act, instead of the 10% rate applied by the AO. The Tribunal noted that the assessee had filed a rectification application under Section 154, which was still pending. The Tribunal directed the AO to decide this issue as per law after necessary factual verification, thereby allowing Ground No. 2 for statistical purposes. 3. Credit for Refund of Earlier Years: In Ground No. 3, the assessee contended that the AO erred in not granting credit for refunds of earlier years adjusted against the wrong demand for the assessment year under consideration. The Tribunal acknowledged that this issue was also part of the pending rectification application under Section 154. The Tribunal directed the AO to resolve this issue as per law, allowing Ground No. 3 for statistical purposes. 4. Levy of Interest Under Section 234A of the Income Tax Act: Ground No. 4 dealt with the levy of interest under Section 234A, which the assessee claimed was unjustified as the return was filed within the due date prescribed under Section 139(1). Since this issue was included in the pending rectification application, the Tribunal directed the AO to address it as per law, allowing Ground No. 4 for statistical purposes. 5. Levy of Interest Under Section 234B of the Income Tax Act: Ground No. 5 related to the levy of interest under Section 234B, which the assessee argued was unjustified. The Tribunal noted that this issue was consequential and allowed Ground No. 5 for statistical purposes. 6. Levy of Surcharge and Education Cess: Ground No. 6 involved the levy of surcharge and education cess. The assessee argued that as a tax resident of Singapore, the tax treaty rates should apply, and no additional surcharge or cess should be imposed. However, during the hearing, the assessee chose not to press this ground. Consequently, the Tribunal dismissed Ground No. 6 as not pressed. Conclusion: The Tribunal partly allowed the assessee's appeal for statistical purposes, directing the AO to address the pending issues as per law and confirming that the management fees were not taxable as FTS under the DTAA. The order was pronounced on 13/10/2022.
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