9911796707
TMI Blog2025 (3) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ANT MEMBER For the Appellant : Shri Sandeep Bhalla For the Respondent : Shri Krishna Kumar (Sr. DR) ORDER PER AMARJIT SINGH, AM: This appeal of the assessee for the assessment year 2021-22 is directed against the order dated 22.09.2023 passed by the DCIT (International Tax) Circle 3(2)(2), Mumbai in pursuance to the Directions issued by the (DRP-2), Mumbai. The assessee has raised the following ground of appeal: 1.0 Re.: Treating fabrication charges received as 'fees for technical services': 1.1 The Assessing Officer ('AO')/ Dispute Resolution Panel ('DRP') has erred in taxing the fabrication charges received by the Appellant of Rs. 15,42,75,210 during the year under consideration by treating the same as 'fees for technical services' in terms of section 9(1)(vii) of the Income-tax Act, 1961 as well as Article 12 of the Double Taxation Avoidance Agreement entered between India and Singapore ("India-Singapore Tax Treaty"). 1.2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, the fabrication charges received by it are not 'fees for technical services' either under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer noticed that assessee has claimed receipt of fabrication charges of Rs. 15,42,75,214/- from its Indian Associate Enterprises namely OCIPL as non taxable. The assessee claimed this income as exempt income on the ground that same is not taxable in India as the assessee has neither any permanent establishment in India as per Article 5 of India-Singapore Treaty and nor any business connection in India. The assessing officer also referred the earlier years from A.Y. 2015-16 to 2020-21 wherein the assessing officer has treated the similar receipt of fabrication charges as FTS and taxed the same as per the Act. On query, the assessee submitted that assessee is a tax resident of Singapore and the provision of India-Singapore DTAA was applicable. The assessee further submitted that in this case, no royalty is received by the assessee under Article 12(3) of the India-Singapore DTAA. The assessee also explained that it had a fabrication plant in which under the process, the existing bushing is melted and additional alloy is added to the extent required to form a new bushing. In the said fabrication process, no technical knowledge, experience, skill, know-how or process is passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee has neither any permanent establishment in India as per Article 5 of India-Singapore Treaty nor any business connection in India. As discussed in this order, the assessee explained with the relevant supporting material that the services rendered by the assessee does not fall within the technical services category since the payment received by the assessee was pertaining to charges for refabrication/refurbishment of bushings carried out by the assessee at its plant in Singapore which were in the nature of charges for work/manufacturing activity. 4. Without reiterating the fact as already discussed, we find that the claim of fabrication charges is the recurring issue in the case of the assessee in the A.Y. 2015-16 to 2020-21 and the ITAT in all these years has decided the issue in favour of the assessee. During the course of appellate proceedings before us, the ld. Counsel has submitted the copies of orders of ITAT as discussed above wherein it is held that receipt towards fabrication of bushings cannot be treated as fees for technical services under Article 12(4)(a) of India-Singapore DTAA as no royalty as per Article 12(3) of India-Singapore DTAA was received by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch services......are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received". On the facts of this case, it is also not in dispute that no such payments, were made to the assessee by its Indian affiliate, which will be covered by Article 12(3) of the Indo-Singapore tax treaty. Yet, taxability under Article 12(4)(a) is invoked, on the ground that one of the group companies, i.e. 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 OCUS, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the other years, and it is for the group to organize a multinational group to organize its activity, as long as it is a bonafide arrangement, in a manner as deemed commercially expedient. The question that we have to really consider is whether or not the activity leading to income was actually carried out in that jurisdiction, and there is no dispute on that aspect at all. The fact that an arrangement regarding situs 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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