The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the consultancy fees and architect fees paid to non-resident entities cannot be treated as fee for technical services as per the Double Taxation Avoidance Agreement (DTAA) between India and Singapore.
The assesseeis a resident company engaged in the business of real estate. The assessee had undertaken development of a residential project at Bandra Kurla Complex (BKC), named ‘Serendipity’. In connection with the development of such project, the assessee had availed certain technical/consultancy services from three non-resident entities located in Singapore. For availing such services, the assessee has paid certain amount to the non-resident entities. The Assessing Officer held that the payment made by the non-resident entities can be termed as FTS under Article 12(4) of India Singapore Tax Treaty.
Before the Tribunal, the assessee argued that the nonresident entities are resident of Singapore, the provisions of India-Singapore Double Taxation Avoidance Agreement (DTAA), being more beneficial, would be applicable. On first appeal, the Commissioner of Income Tax (Appeals) allowed relief to the assessee.
Allowing the plea of the assessee, Judicial MemberMr. SaktjithDey and Accountant Member Mr. Rajesh Kumar held that from the nature of services provided by the non-resident entities and the terms and conditions under which it was provided, it is clear that whatever services were provided are project specific and cannot be used for any other project by the assessee.
“Further, while providing such services neither any technical knowledge, skill, etc is made available to the assessee for utilizing them in future, independently nor any developed drawing or design have been provided to the assessee which can be applied by the assessee independently. Thus, it is very much clear, the conditions of Article 12(4) of the tax treaty are not fulfilled,” the bench said.
Dismissing the appeal filed by the Revenue, the bench held that “though, the assessing officer has generally observed that in course of providing services to the assessee, the non-resident entities have made available technical knowledge, know-how, processes to the assessee. However, no substantive material has been brought on record by him to back such conclusion. Even, before us, learned departmental representative has not brought any material to demonstrate that conditions of Article 12(4) have been fulfilled in the facts of the present case. In view of the aforesaid we do not find any valid reasons to interfere with the decision of learned Commissioner (Appeals).”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
