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TMI Blog2023 (4) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS for the fabrication charges received by the assessee. Appeal filed by the assessee is allowed. - ITA NO.2041/MUM/2022 - - - Dated:- 9-3-2023 - Shri Baskaran Br, Accountant Member And Ms. Kavitha Rajagopal, Judicial Member For the Assessee : Shri Sandeep Bhalla And Ms. Megha Shah For the Department : Ms. KanupriyaDamor ORDER PER KAVITHA RAJAGOPAL: This appeal has been filed by the Assessee challenging the Assessment Order passed pursuant to the direction of the learned Dispute Resolution Panel (DRP) relevant to assessment year 2019-20. 2. The assessee has challenged the grounds of taxing the fabrication charges amounting to Rs.18,96,94,367/- as Fees for Technical Services u/s 9(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) and Article 12 of Double Taxation Avoidance Agreement (DTAA) between India and Singapore. 3. The assessee has also challenged the Non-Granting credit for taxes paid by way of TDS of Rs.1,89,69,455/- along with other consequent grounds. 4. The brief facts are that the assesssee is a company incorporated in Singapore and a group concern of Owens Corning Group of Company, which is a leading man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee for the reason that the assessee was receiving alloys from OC Inc in the form of ingots, powders etc. and the said processes are patented by OC Inc., since the bushings are refabricated only by the use of the said patented alloys by the group company and also for the reason that the assessee has not signed any agreement with OC Inc for the said procurement of alloys nor does it have any agreement with OCIPL for re-fabrication services rendered to OCIPL. The A.O. also observed that OCIPL was not paying any Royalty to OC Inc or to the assessee for the alloys or for the fabrication services. The AO held that OCIPL has made available the right to use the patented alloys and the technology of re-fabrication. The AO has also contended that OCIPL sends the bushings to the assessee s company instead of the OC Inc with which it has a direct agreement and that the assessee has failed to substantiate the fact that it does not have any agreement with OC Inc. The AO considered this as a colourable device for evading tax and has held the receipts received by the assessee as Fees for Technical Services instead of manufacturing contract/works contract. The learned DRP has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y used during re-fabrication for which there is a separate arrangement/agreement between OC Inc and OCIPL. The assessee has contended that it only receives re-fabrication charges from OCIPL. The assessee further stated that it is an admitted fact that the assessee being tax resident in Singapore avails the benefit of Indo-Singapore DTAA and contends that it does not have a permanent establishment in India thereby stating that the fabrication charges is not liable to be taxed in India. The assessee contends that only Article 12 of the said treaty is applicable to the assessee s case in which the term Fees for Technical Services is defined under Article 12(4) of the said treaty. Under this Article any services categorised as managerial, technical or consultancy services will fall under the term Fees for Technical Services . The assessee s contention that re-fabrication work carried off by the assessee is in the nature of works contract or manufacturing activity. It is also said that as per the said Article, the services rendered should be ancillary and subsidiary to the application of enjoyment of the right to property or information for which payment in the nature of Royalty ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s invoked, on the ground that one of the group companies, Le OC-US, has received such payments from the Indian affiliate, OCIPL, which are covered by Article 12(3) of Indo- Singapore tax treaty, and by invoking Article 9. The stand of the Assessing Officer and the DRP is that since the alloys are provided by the OC-US, which is an associated enterprise under article 9, one has to proceed on the basis that the alloys are provided by the assessee, and as the services are ancillary and subsidiary to the application or enjoyment of the right, property or information for which payment is made to OC-US, these services are taxable as fees for technical services. 11. As far as the role of Article 9 is concerned, it comes into play when conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises and remains confined to bringing those profit for taxes which, but for such arrangements, an enterprise in the respective tax jurisprudence would have made. The scope of Article 9 thus is to neutralize the impact of intra- AE relationship vis-a-vis the profits made in dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of entities providing different facilities, in connection with a transaction of the multinational group, is done in a tax-efficient manner, cannot be reason enough to disregard the arrangement. We are satisfied that so far as the income of the assessee from the refurbishing of the bushes is concerned, it is not taxable in India as the provisions of Article 12(3) cannot be invoked in this case, and that, so far as the provisions of Article 12(4)(a) are concerned, these provisions cannot be invoked as the assessee has not rendered these services in connection with the services for which a payment described in paragraph 3 is received by the assessee. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and delete the impugned addition of Rs.4,84,44,048/-. The assessee gets the relief accordingly. 9. From the above said decisions, it is observed that the Tribunal has held that the charges received by the assessee for carrying out of re-fabrication of the bushings does not tantamount to make available of technical knowledge, experience, skill, know-how or process . The Tribunal has also held that as there is no transf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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