Architectural Services provided to Singapore Entity taxable at 10% as per India Singapore DTAA: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that the architectural services provided to Singapore Entity taxable at 10% and there is no scope of tax deduction at the rate of 20% when the benefit of Double Taxation Avoidance Agreement (DTAA) is available.

The assessee Company, M/s. Mantri Technology Constellations Pvt. Ltd. is engaged in the business of real estate development, construction of residential apartments and has issued debentures to certain overseas entities and engages M/s. Space Matrix Design Consultants Pte. Ltd., Singapore for architectural services to the proposed project at Chennai.

The revenue found that the assessee has made payments to Space Matrix Design Consultants Pte. Ltd without deduction of tax at source and similarly for interest on debentures to non-residents, the assessee has not applied the rate as prescribed in Section 206AA of the Act as the PAN was not provided by the recipients.

The assessee has made interest payments to debenture holders at the rate of 10% as per Double Taxation Avoidance Agreements (DTAA) as the recipients are residents of foreign countries.

In respect of payments made to M/s. Space Matrix Design Consultants Pte. Ltd., Singapore, the assessee has not deducted the TDS as services are in the nature of architectural services and the payments were made to the recipient company of Singapore as per Article 12 of the India-Singapore DTAA.

The Assessing Officer is of the opinion that the assessee should have deducted tax at 20% as per the provisions of the Act. Further, the Assessing Officer found as per the agreement that the services rendered by the Singapore company are in the nature of Fees for Technical Services (FTS) and cannot be categorized as architectural services.

Similarly, in respect of interest payments made to debenture holders, the Assessing Officer is of the opinion that the assessee should deduct the tax at 20% in terms of Section 206AA of the act as PAN is not provided, and the assessee has not furnished the Tax Residency Certificate of the debenture holders.

However, on an appeal by the assessee, the CIT(A) found that the assessee has deducted TDS at 10% as per provisions of Section 260AA of the Act and relied on the Tribunal decision and has observed that the deduction of TDS by the assessee is in accordance with the law and partly allowed the assessee appeal.

Consequently, the assessee and the revenue appealed against the order of CIT(A), Bangalore passed under section 201(1) and 201(1A) and u/s. 250 of the Income Tax Act, 1961 (the Act).

The tribunal consists of an Accountant Member, A.K. Garodia and a Judicial Member, Pavan Kumar Gadale restored the disputed issue to the file of Assessing Officer for the limited purpose to verify and examine the specific nature of services. Further, the assessee should be provided with adequate opportunity of hearing and shall cooperate in submitting information and allow the grounds of appeal of the assessee for statistical purposes.

Further, the Tribunal while addressing the appeal of the Revenue upheld the order passed by the CIT(A) the payments are made to Singapore based entities and liable for TDS at 10%.