TMI Blog2024 (3) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that in the absence of any specific provisions in the DTAA, the scope of taxing the said income shall be only business profits subject to existence of PE in India, and cannot be tax under the residuary Article of the relevant DTAA. The said income cannot be expanded within the scope of section 9(1)(vii) r.w.s 115A of the Act. It is settled position of law that in the absence of a clause in DTAA not dealing with a particular item of income, the payments are not be regarded as residuary income but as business income which is not chargeable to tax in India, in the absence of any PE of the Non-Resident in India. Decided in favour of assessee. - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Assessee : Sri PVSS Prasad, AR For the Revenue : Dr. Satyasai Rath, CIT-DR ORDER PER S. BALAKRISHNAN, ACCOUNTANT MEMBER : This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-10, Hyderabad in appeal No. ITBA/APL/S/250/2021-22/1039488281(1), dated 7/2/2022 arising out of the order passed u/s. 143(3) r.w.s 144C of the Income Tax Act, 1961 [the Act] for the AY 2017-18. 2. Briefly stated the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical Services was inserted with effect from 1st April, 2017 ie., after the year under consideration and for the year under consideration the said income was business profits which could not be taxed in India in absence of a Permanent Establishment [PE] in India. 4. The Ld. CIT(A), Hyderabad-10 failed to appreciate the point that the facts of the case of the appellant are identical to the appellant s own case for AY 2016-17 wherein the Ld. CIT(A) held that the provisions of India-Mauritius Tax Treaty would prevail and FTS income would not be taxable in India as the appellant does not have a PE India. 5. The Ld. CIT(A), Hyderabad-10 erred in law and as well as facts of the case in confirming the order of the AO that the appellant had a service Permanent Establishment [PE] in India without appreciating that the clause on service PE was inserted in India Mauritius Tax Treaty with effect from 1st April, 2017 ie., after the year under consideration. 6. Without prejudice to the above, the Ld. CIT(A), Hyderabad-10 erred in law and as well as facts of the case in holding that the appellant has a Service PE in India, disregarding the factual position that the appellant has no presence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and in the instant case since the assessee does not have any PE in India, these business profits cannot be taxed in India. 5. Per contra, the Ld. Departmental Representative [DR] argued that in the absence of any specific provisions in DTAA regarding the taxability of the income, the provisions of section 115A squarely applies. The Ld. DR also further submitted that the assessee has also paid a differential tax amount of Rs. 1,78,700/- during the scrutiny assessment and it is only an afterthought to the earlier accepted stand of the assessee. He therefore pleaded that the order of the Ld. CIT(A) be upheld. The Ld. DR relied on the Circular No. 333 [F.No.506/42/81-FTD], dated 2-4-1982. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities and the written submission made by the assessee. There is no dispute on the fact that the assessee is not having a Permanent Establishment [PE] in India. Further, there is no specific clause in the DTAA entered into between the Republic of India and Mauritius as pointed out by the Ld. AR in his written submissions, Article-12A was inserted w.e.f 1/4/2017 and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same does not deem to accrue or arise in India based on the decision of the Hon ble Delhi High Court in the case of CIT vs. Eon Technology P. Ltd. (ITA No. 1167/2011) and further holding that in the absence of a specific clause on FTS under the India-UAE DTAA, provisions of Article 22 on residuary/ other income cannot be invoked based on the decision in the case of Kingfisher Airlines Ltd. (supra). In view of the factual and legal position as well as our findings in respect of ground No.1 (para 8, 8.1, 8.2 and 10 referred), we are inclined to uphold the order of the Ld. CIT(A). Accordingly ground No. 2 of the Revenue is dismissed. The Hon ble Madras High Court in the case of Bangkok Glass Industry Co. Ltd vs. ACIT reported in[2013] 34 taxmann.com 77 (Madras) has held as follows: Even though the revenue canvassed this issue before the Tribunal, in the absence of any material to read the clauses otherwise, rightly, the Tribunal came to the conclusion that a sum of 4,79,640 USD alone would fall for consideration under article 12 as royalty income and the other to be assessed as by way of technical services. Since the assessee had no PE, the said amount cannot be brought under articl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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