The Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that the Standby Maintenance Charges received can not be assessed as fees for technical services (FTS) and taxable only to the extent of its reference to “business connection” in India.
The revenue contended that the CIT(A) had erred in concluding that the amount received by the assessee, Reliance Globalcom Limited from Tata Communications Ltd. (TCL) as Standby Maintenance Charges was not in the nature of “fees for technical services‟ (FTS) under section 9(1)(vii) of the Income Tax Act, 1961.
On the other hand, the assessee is aggrieved with the rejection by the CIT(A) of its claim that the Standby Maintenance Charges received from TCL only qua the portion thereof which was relatable to the length of cable in Indian territorial waters vis-a-vis the length of cable worldwide was to be taken as the total revenue deemed to accrue or arise in India from which relatable expenses were to be reduced for computing its income accruing or arising in India u/s 9(1)(i) of the Act.
The assessee at the threshold submitted that the issues involved in the present appeal were squarely covered by the orders passed by the Tribunal in the assessee‟s own case for the preceding years.
The coram headed by the Vice President, Pramod Kumar, and Judicial Member, Ravish Sood held that the Standby Maintenance Charges received by the assessee from TCL could not be assessed as FTS and was its „business income‟ that was taxable only to the extent of its reference to the “business connection” in India. The turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to the operations carried out had to be calculated on the basis of apportionment of cable length in India vis-a-vis the worldwide cable length.
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