10% Income Tax on Royalty/FTS as per India-Singapore DTAA: ITAT [Read Order]

Income Tax - Royalty - FTS - India-Singapore DTAA - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Pune bench has held that royalty/fee for technical services (FTS) taxable at the rate of 10% as per the Double Taxation Avoidance Agreement (DTAA) between India and Singapore.

The Tribunal bench comprising Vice President R S Syal and Judicial Member Partha Sarthi Chaudhary was considering the issue of taxability of Rs.3,88,94,824/- received by the assessee, a Switzerland based nonresident, from its Indian affiliate, namely, Rieter India Private Limited (RIPL).

The two-member bench observed that the receipt of Rs.3.84 crore is neither reimbursement nor royalty for software as the assessee rendered I.T. services to its group companies including RIPL and offered a sum of Rs.20.04 crore to tax as royalty/fees for technical services. The assessee contended that the same is not taxable.

“We have further found that the nature of services provided under the Master Agreement for which Rs.20.04 crore has been offered to tax is exactly similar to that claimed to be reimbursement for which Rs.3.84 crore has been received. In fact, there is only one Master agreement with RIPL under which the composite I.T. services were rendered to the group companies including RIPL – whether with the help of own software or those purchased from third party vendors,” the bench observed.

While dismissing the appeal filed by the assessee, the Tribunal held that “On a pertinent query as to whether revenue of Rs.20.04 crore received by the assessee from RIPL towards I.T. Services was offered and taxed as Royalty or Fees for technical services, as the same treatment would be given to Rs.3.84 crore as well, the ld. AR submitted it did not make any difference as both the royalty/FTS are taxable at the rate of 10% under the DTAA. We, therefore, hold that the authorities below were fully justified in including Rs.3,88,94,824/- in the total income of the assessee and charging it to tax at 10% in parity with the assessee suo motu offering Rs.20.04 crore to tax at that rate.”

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