While hearing the case of Booz & Company, Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that consideration received by Booz Group of Company for providing technical personnel to Indian AE is not taxable under India-United Arab Emirates (UAE) Double Tax Avoidance Agreement (DTAA).
Assessee, Booz & Company engaged in the business of providing management and technical consultancy services. It is incorporated in the United Arab Emirates (UAE). During the year it has provided technical/professional personnel to its Indian associated enterprise named Booz & Company India Private Limited and also received a fee of Rs. 112.83 lakhs from Booz India.
During the course of assessment proceedings, the Assessing Officer (AO) observed that the aforesaid amount received by the assessee was not included in its return of income and the same was escaped from tax.
In response, the assessee submitted that it is governed DTAA entered between India and UAE. The said DTAA does not have any specific clause on taxability of fees for technical services and hence the said receipt is taxable as business income. It is further contended that since it did not have Permanent Establishment (PE) in India, above said the fee is not taxable in India.
But the AO was refused to accept assessee’s submission and made an addition of the said amount by holding that some of the group companies have approached Authority for Advance Ruling (AAR) in order to determine the taxability of their receipts from Indian entities and further stated that wherein the AAR has held that the above said companies are having “permanent establishment” in India and income received by them from Indian companies are taxable as business profit under Article 7 of Tax agreement of India and respective countries.
On appeal, the CIT(A) also upheld the order of the AO and confirmed the addition made by him.
Aggrieved by the order of the authority assessee approached the tribunal on further appeal.
After considering the facts and circumstances, the Tribunal bench comprising of Judicial Member Sandeep Gosain and Accountant Member B.R.Baskaran objected the findings of the lower authorities and observed that as per article 7 of the Indian-UAE DTAA, the business receipts are taxable in India only if the assessee has PE in India. We have earlier noticed that the tax authorities have held that there is PE in India only on the basis of the ruling given by AAR. While perusing the available materials on records it is clear that the assessee does not have a permanent establishment in India.
The division bench further observed that the assessee has proved that it does not have any fixed place of PE and also shown M/s Booz India has also not earmarked any specific place under the control or disposal of the assessee Hence it cannot be said that the assessee did carry on any business in India through the Fixed place of business. While deleting the addition made by the AO the bench has declared that consideration received by the assessee for providing Technical Personnel to Indian AE is not taxable under India-UAE DTAA.
