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TMI Blog2022 (10) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... vied in respect of tax liability of the assessee under DTAA. Accordingly, groundno. 3 of the assessee is allowed. - ITA No.2356/Kol/2019 - - - Dated:- 18-10-2022 - Shri Rajpal Yadav, Vice President And Shri Girish Agrawal, Accountant Member For the Appellant : Shri K. M. Gupta, AR For the Respondent : Shri Gaurav Kanaujia, CIT, DR ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. DCIT, (International Taxation), Circle-2(1), Kolkata vide Order No. ITBA/AST/S/143(3)/2019-20/1017544064(1) dated 23.08.2019 passed against the order of the Dispute Resolution Panel-2, New Delhi u/s. 144C(5) r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 19.07.2019. 2. Grounds of appeal raised by the assessee are reproduced as under: 1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Deputy Commissioner of Income Tax ( Ld. AO ) under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ( the Act ) is bad in law. . 2. Taxability of income earned from testing and other services 2:1. That on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO, assessee contended that these tests were conducted in the laboratory of assessee in Finland without any employees of the assessee visiting India to render such services and hence the income could not be taxed in India in view of the India Finland Double Taxation avoidance Agreement (DTAA). 5. Ld. AO passed the draft order under section 144C of the Act dated 20.20.2018 proposing to tax income from testing and other services at the rate of 10% on the gross basis. Assessee raised objection before the Ld. DRP on the proposal of the Ld. AO. 6. Ld. DRP issued its directions by its order under section 144C of the Act dated 19.07.2019 wherein it noted that identical issue was considered by the DRP in assessee s own case for AY 2015-16 as under:- 3.2 Having considered the submissions of the assessee, we find that the materials for testing were sent to the assessee s laboratories for analysis and testing the quality of the material in connection with the materials and equipment is to be used for construction and erection of the plants. There is no dispute that in laboratories test and related analytical services are based on technical expertise of the personnel/employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate or a case where the fees for technical services relate to services were performed within a contracting state, then the income shall be deemed to arise in the state in which the right of property is used or the state in which the services were performed. The third limb relates to the case where there is a permanent establishment which is not relevant in our case. 20. In the case on hand, the income in question becomes taxable as royalty or fees for technical services, is deemed to arise in the contracting state where the payer is a resident of that contracting state, which is in India, in our case. 21. The income, m question, is also taxable in India as the right or property for which the royalty was paid, is used within India and hence, it is deemed to arise in India, i.e. the state in which the right or property is used. 22. The assessee argues that the technical services of testing is performed outside the country, i.e. in Finland and hence cannot be taxed in India in view of the exception curved out to Article 12(5) of the India-Finland DTAA. The exception in question is, when the fees is paid for technical services which are performed within a contracting state, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue was dealt in respect of India Singapore DTAA and it was held that education cess cannot be levied in respect of tax liability of assessee company which was a company incorporated under the laws of Singapore. It was submitted that relevant Articles 1, 2 and 12 of India Singapore DTAA are similar to Articles 3,4 and Article 12 of India Finland DTAA and covers the issue in hand of the assessee in its favour. 13. Per contra, Ld. CIT, DR strongly opposed the submissions made by the Ld. Counsel and contended that the purpose of Double Taxation Avoidance Agreement is to avoid double taxation. When the income is subjected to tax from India perspective, the surcharge and education cess as applicable under the Act on the tax payable by the assessee is to be levied, which has been rightly so done by the Ld. AO. 14. We have heard the rival contentions and perused the decision referred by the Ld. Counsel in the case of DIC Asia-Pacific Pte Ltd (supra) by the coordinate bench of ITAT Kolkata. We find that in the said decision, coordinate bench has dealt with the same issue as before us relating to levy of surcharge and education cess on the tax payable by the assessee under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest and royalties can indeed be taxed in the source state, the tax so charged on the same, under Article 11 and 12, cannot exceed 15% and 10% respectively. The expression tax is defined in Article 2(1) to include SI.T .A. No .: 1458/Kol/2011 Assessment year : 2 0 0 9 -1 0 Page 4 of 5 income tax and is stated to include surcharge thereon, so far as India is concerned. Article 2(2) further extends the scope of the tax by laying down that it shall also cover any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1 . 7. We find that education cess was introduced in India by the Finance Act, 2004, and Section 2(11) of the Finance Act 2004 described it as follows: (11) The amount of income-tax as specified in subsections (4) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the Education Cess on income-tax , so as to fulfil the commitment of the Government to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teisojen tulovero; inkomstskatten for samfund); (iii) the communal tax (kunnallisvero; kommunalskatten); (iv) the church tax (kirkollisvero; kyrkoskatten); (v) the tax withheld at source from interest (korkotulon lahdevero; kallskatten pa ranteinkmost); and the tax withheld at source from non residents income (rajoitetusti verovelvollisen lahdevero; kallskatten for (vi) begransat skattskyldig); (hereinafter referred to as Finish tax ); (b) in India, the income-tax, including any surcharge thereon; (hereinafter referred to as Indian tax ) 4. The Agreement shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws. 16. From the above, we note that relevant articles in the two treaties of India Singapore and India Finland bear similarity and the findings given as recorded by ITAT Kolkata in the case of DIC Asia-Pacific Pte Ltd (supra) are applicable in the present case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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