2023 (8) TMI 1257 - AT - Income Tax

Income deemed to accrue or arise in India - fees for technical services - Treating the services provided by the assessee to Reliance Corporation IT Park Limited and the payment received as Fees for Technical Services u/A 12 of India Singapore DTAA - HELD THAT - As could be seen from Virtue of clause 2.9 the assessee who is the principal designer assigns and transfer to RCITP all right title and interest in all deliverables from the moment of creation and the principal designer the assessee grants RCITP a perpetual irrevocable non-exclusive royalty-free fully paid-up right and license to use copy, modify and prepare derivative works of the principal designer intellectual property rights incorporated in the deliverables for the use of the deliverables by the RCITP and its affiliates and third parties engaged by RCITP in connection with the business operations of the RCITP and its affiliates. This clearly shows that the assessee is making available RCITP all reports, analysis, tests, tables, plans, drawings or other documents in any form including electronic or printed form for the use of RCITP which enables RCITP to apply and use all these deliverables for its business purposes which specifies the conditions of sub clause (b) and (c ) of clause (4) of Article 12 of Indo Singapore DTAA. Thus, the payments received by the assessee from RCITP are fees for technical services falls under sub clause (4) of Article 12 of Indo Singapore DTAA. Lower authorities have rightly treated the amounts received by the assessee from RCITP as fees for technical services under Article 12 (4) of Indo Singapore DTAA and was rightly brought to tax at 10%. Decided against assessee.

Summary

Issues Involved:
1. Classification of services as Fees for Technical Services under Article 12 of India-Singapore DTAA.
2. Incorrect computation of returned income and double taxation.

Summary:

Issue 1: Classification of Services as Fees for Technical Services

The assessee, a tax resident of Singapore, provided design services to Reliance Corporation IT Park Limited (RCITP). The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) concluded that the payments received by the assessee from RCITP were Fees for Technical Services (FTS) under Article 12 of the India-Singapore Double Tax Avoidance Agreement (DTAA). The AO determined that the services involved the development and transfer of technical plans and designs, which made available technical knowledge and processes to RCITP, satisfying the conditions of Article 12(4)(b) and (c) of the DTAA. The DRP upheld this view, stating that the transfer of technical plans enabled RCITP to apply the technology embedded in the designs. The Tribunal agreed with the lower authorities, concluding that the payments received by the assessee were indeed FTS under Article 12(4) of the DTAA and were rightly taxed at 10%.

Issue 2: Incorrect Computation of Returned Income

The assessee contended that the AO incorrectly mentioned the returned income as INR 3,39,42,926 instead of INR 48,53,503, resulting in double taxation. The Tribunal restored this ground to the AO for re-examination and appropriate action, allowing the ground for statistical purposes.

Conclusion:

The appeal of the assessee was partly allowed, dismissing the first ground and restoring the second ground to the AO for further examination.

Order Pronounced:

Order pronounced in the open court on: 25/08/2023