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TMI Blog2024 (1) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... s 148 of the Act is bad in law. 2. On the facts and circumstances of the case and in law, the draft order passed by the AO u/s 147 r.w.s. 144C of the Act is bad in law. 3. On the facts and circumstances of the case and in law, the AO erred in taxing the receipts of the Assessee amounting to Rs. 11,99,47,943/- as Fees for Technical Services (FTS) at the rate of 10% plus applicable surcharge and cess u/s 115A of the Act." 3. The grounds are being adjudicated on the merits of the issue as to "whether Fees for Technical Services is taxable in India as per the India-Thailand Treaty or not". 4. Brief facts for adjudication of the case are that the assessee is a company incorporated in Thailand and is a tax resident of Thailand. During the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the Beneficiary in this case. Further, such incomes are being received by the assessee at a predetermined amount as specified by the Service Level Agreements. Scrutiny of nature of service provided as specified in the agreement indicates that these are broadly managerial technical or consultancy services in nature, which broadly comes within the sweep of FTS. 8. The chargeability of FTS is provided u/s 9(1)(vii) of the Act, which is as below: "Income by way of fees for technical services payable by- (a) The Government; or (b) A person who is a resident, except where the fees are payable in respect of service utilized in a business or profession carried on by such person outside India or for the purpose of making or earning any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the contracting states. Further the income of nature of FTS is clearly sourced from India and such income has to be taxed in India in the absence of specific benefit under DTAA. The ld. DRP held that the assessee has tried to structure these FTS payments through group entities in such way to avoid attracting of taxation under the Act and this is clearly a tax avoidance scheme which is squarely assailed under limitation of benefit (LOB) as specified under article 27 of DTAA between India and Thailand. The ld. DRP held that the matter is still not settled judicially and hence, contention of the assessee is to be rejected. Accordingly, the AO passed an order treating the amount received by the assessee as FTS and charged 10% on the total rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been reproduced below: "... It was also contended by the revenue that if article 12(3)(g) of the DTAA was not applicable then one had to go back to the domestic law, namely, the Act and tax; the receipt as fees for technical services within the meaning of section 9(1)(vii)(b) read with Explanation 2 there under. What article 7(7) seems to convey is that where the business profits of the non-resident include items of income for which specific or separate provisions have been made in other articles of the treaty, then those provisions would apply to those items. Per contra, if it is found that those provisions are not applicable to those items of income, then the logical result would be that those items of income would remain in arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, when the treaties do not contain FTS clause, what is the impact on taxability. Wherever FTS clause is not available in the treaty with a country, then the income in question would be assessable as business income and it can be brought to tax in India, only if the FTO has the permanent establishment in India and if the earning of income is attributable to activities or functions performed by such permanent establishment. This view is supported by the decision of the Coordinate Bench. 44. In view of the above reasons, we hold that wherever under the DTAA' Make available clause is found, then as there is no imparting, the payment in question is not 'FTS' under the Treaty and when there is no 'FTS' clause in the trea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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