The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held that cost charges are not taxable as Fee for technical service under Indo –UK Treaty.
Assessee was a company registered in the United Kingdom and was a tax resident of that State and assessee was an international, integrated engineering and consultancy company. The assessee is engaged in the business of providing structural and MEP (Mechanical, Electrical and Public Healthy) Engineering and consultation services for various buildings and projects in India. During the year under consideration assessee receive various amounts from various services provided to companies in India.
While considering the assessment proceeding assessing officer conclude that the amount received by the assessee under the head ‘Cost Recharge’ was treated as Royalty under section 9(1)(vi) of the Income Tax Act 1961 as well as under Article 13 of India UK Double Taxation Avoidance Agreement(DTAA).Against this order assesee filed appeal before the ITAT.
Vijay Mehta counsel for assessee contended that since the supply of technical design/ drawings/plans by it to the Indian entity did not make available any technical knowledge, know how, process, etc., it couldn’t be treated as fees for technical services under Article-13(4)(c) India-UK tax treaty.
Sunil Umap counsel for revenue observed that “payment received under the head ‘Cost Recharge’ would be Royalty as per the Act as well as per India UK DTAA as it is received as consideration for the use of, or the right to use the trademark or brand name ‘Buro Happold’ owned by it. Further description of the services under all heads as per the agreement mentioned earlier clearly shows that the assessee is charging Buro India for the use of , or the right to use the information concerning industrial, commercial or scientific experience. Therefore, the amount received by the assessee under the head ‘Cost Recharge’ was treated by the ld. AO as Royalty u/s 9(1)(vi) of the Act as well as under Article 13 of India UK DTAA.”
After considering the contentions of the both parties the division bench of ITAT comprising Aby T Varkey, (Judicial Member) and M.Balaganesh, (Accountant Member) allow the appeal filed by the assessee and held that “assessee had actually offered the receipts as its income in the return of income but by way of additional ground claimed to be not taxable in India as per the Act and as well as per the Treaty.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
