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TMI Blog2021 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of consulting engineering services would go back to Ld. AO for adjudication. Logically, the issue of taxability of cost recharge, which has been treated as ancillary and incidental to consulting engineering services, would also go back to Ld. AO for re-adjudication in the light of stand taken qua consulting engineering services. Therefore, we deem it fit to restore both the grounds to the file of Ld. AO for re-adjudication de-novo after affording reasonable opportunity of hearing to the assessee, who, in turn, is directed to substantiate his claim and demonstrate that the facts in AY 2012-13 and in the year consideration was identical Levy of surcharge and Education Cess on tax calculated at special rates under the DTAA - HELD THAT:- The issue in dispute is squarely allowed in favour of the assessee by the Co-ordinate Bench decision of Hyderabad Tribunal in the case of RAK Ceramics UAE vs. DCIT International Taxation (2), [ 2019 (4) TMI 667 - ITAT HYDERABAD] wherein it was categorically held that surcharge and education cess could not be added to connotation tax when the same is calculated as per DTAA. We find that the Hyderabad Tribunal while rendering this judgment had intur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal ground of appeal on 20/01/2020 which is as under:- 1. Ground No.1 - Taxability of Consulting and Engineering Service 1.1. On the facts and in the circumstances of the case and in law, Consulting and Engineering Service fee amounting to INR 96,59,182 is not taxable as per the provisions of Article 13 of the India-UK Double Tax Avoidance Agreement. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a company registered in United Kingdom and is a tax resident of that state. It is in the business of providing engineering, design and consultancy services. Assessee is providing structural and MEP (Mechanical, Electrical and Public Health) engineering for various buildings. The return of income for the A.Y.2015-16 was filed by the assessee on 30/11/2015 declaring total income of ₹ 47,97,000/-. The assessee has offered to tax the income it has received under the head "consulting engineering fees" as fee for technical services under Article 13 of India-UK DTAA. During the scrutiny proceedings, the assessee filed the revised computation of income wherein the receipt from M/s. Buro Happold Engineers India Pvt. Ltd., was me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate and commercial. The assessee pleaded that the transactions are governed by the India-UK DTAA as assessee is a tax resident of UK. He pleaded that as per Article 13 of India-UK DTAA, Fees for technical Services ('FTS') provided by foreign company would be taxable in India on gross basis. The relevant extract of the definition of FTS as per Article 13 of India-UK DTAA is reproduced below for your ready reference. "4. For the purposes of paragraph 2 of the Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: a. …..or b. ……or c. Make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design." 3.4. The ld. AR further submitted that in order to fall within the ambit of Article 13 of India-UK DTAA, twin conditions are to be satisfied:- 1. Services should be in the nature of technical or consultancy services and 2. Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 13/11/2019 wherein the exactly similar arguments were advanced by the ld. DR for that year also. We find that this Tribunal for A.Y.2014-15 in assessee's own case had admitted the additional ground and disposed off the issue in dispute as under:- "3.1 Facts on record would reveal that the assessee being non-resident assessee stated to be engaged in providing engineering and consultancy services was assessed for year under consideration vide final assessment order dated 23/10/2017 pursuant to the directions of Ld. DRP, wherein the income of the assessee was determined at ₹ 637.19 Lacs as against Nil return filed by the assessee on 30/11/2014. The original return was revised twice wherein the assessee finally declared an income of ₹ 120.58 Lacs on account of consulting and engineering services. The assessment was framed on the basis of latest revised return filed by the assessee on 31/03/2016. The assessee is stated to be an entity registered in UK and engaged in the business of providing engineering design and consultancy services with respect to buildings. 3.2 Initially, a draft assessment order was passed on 08/12/2016 as per law, wherein it transpired that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and subsidiary to the application or enjoyment of right of the assessee in brand used by the Buro- India and the payment was royalty in terms of para 3(a) of Article-13 of the treaty and therefore, its nature was that of fees for technical services. Aggrieved, the assessee is under appeal before us. 4. Upon perusal of earlier order of Tribunal in assessee's own case for AY 2012-13, it is evident that two issues were under consideration in the said appeal viz. (i) Taxability of Consulting & Engineering Services; (ii) the taxability of cost recharge which were stated to be ancillary and incidental to consulting & engineering services. The co-ordinate bench, in para-20, held that the amount received by the assessee on account of consulting & engineering services were to be treated as business profit and in the absence of assessee's PE in India, it could not be brought to tax. Consequently, the cost recharge which was considered to be ancillary and incidental to consulting & engineering services, was also held to be not taxable in the absence of assessee's PE in India. However, in the year before us, the assessee has already offered the consulting & engineering fees t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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