2024 (2) TMI 1112 - AT - Income Tax

Taxability of income in India - income accrue or arise in India or not - make available any technical knowledge, skill, know-how or process or not? - HELD THAT - As relying on assessee own case 2022 (11) TMI 1313 - ITAT PUNE for A.Y. 2017-18 as assessee is entitled for benefit of India USA DTAA and since the condition of make available has not been satisfied in the case of the assessee, the services are not taxable in India. Accordingly, we allow the appeal of the assessee.

Summary

Issues involved:
The appeal filed by the assessee against the final assessment order dated 11.07.2023 passed by the Income Tax Officer (IT), Ward-4, Pune u/s 143(3) r.w.s 144C(13) of the Income Tax Act, based on directions issued by the Dispute Resolution Panel (DRP) u/s 144C(5) of the Income Tax Act, 1961 dated 27.06.2023.

General Grounds:
The Hon'ble DRP/Ld.AO assessed the total income of the Appellant at INR 842,703,639, which the appellant contested based on the previous decisions of the Hon'ble Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) for earlier years.

Addition in respect of Fees for Included Services ('FIS') - INR 842,703,639:
The issue revolved around the taxation of the amount of INR 842,703,639 received by the Appellant from its Indian customer as 'Fees for technical services' u/s 9(1)(vii) of the Act and under Article 12 of the India-USA Double Tax Avoidance Agreement ('DTAA').

Submission of ld.AR:
The ld. Authorised Representative for the assessee argued that the income should be exempt as the services did not accrue or arise in India and did not provide technical knowledge, skill, know-how, or process, citing the exception under clause (b) of section 9(1)(vii) of the Act and the Indo-US tax treaty (Article 12).

Submission of ld.DR:
The Departmental Representative for the Revenue relied on the Assessing Officer and DRP's orders, acknowledging that for A.Y. 2017-18, the identical issue was decided in favor of the assessee by the ITAT.

Findings & Analysis:
The DRP accepted that the issue for the current year was the same as decided by the ITAT Pune for A.Y. 2017-18, 2018-19 & 2019-20 in the assessee's own case. Following the rule of consistency, the ITAT held that the assessee was entitled to the benefit of the 'India USA DTAA' as the 'make available' condition was not satisfied, thereby allowing the appeal of the assessee.

The ITAT Pune, comprising Shri S.S. Godara, Judicial Member, and Dr. Dipak P. Ripote, Accountant Member, pronounced the order in favor of the assessee on 20th February 2024, allowing the appeal and confirming the benefit of the 'India USA DTAA' based on the 'make available' condition not being met.