Fabrication Charges  received from AE for Manufacturing Glass is  not FTS under India-Singapore Tax Treaty: ITAT [Read Order]

The  Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held that fabrication charges received from Associate Enterprise (AE) for manufacturing glass is not Fee for Technical Services (FTS) under India-Singapore Tax Treaty.

The Assessee Owens Corning Inc. is incorporated in Singapore and a group concern of Owens Corning Group of Companies, a leading manufacturer of glass. The assessee is engaged in the business of manufacturer and sale of glass fibers in India.

The assessee filed return of income for the Assessment Year (“AY”) 2020-21 disclosing a total income of Rs.NIL. Subsequently, the case was selected for scrutiny.

The Assessing Officer found that there are receipts on account of fabrication charges of Rs.15,75,67,856/- from its Indian Associate Enterprises namely OCIPL as non-taxable.

The Assessee claimed the income as exempted as the assessee has neither any Permanent Establishment (“PE”) in India as per Article 5 of India-Singapore Treaty nor any business connection in India.

Thereafter, the AO sought explanation regarding the charges and he was not satisfied with the contentions of assessee and treated assessee's receipts as Fee for Techical Services (FTS) as per Article-12(4)(a) of the Double Taxation Avoidance Agreements (DTAA) between India and Singapore along with making addition.

Against the assessment order passed by the AO, the assessee has filed objections in Form No.35A with the Dispute Resolution Panel (DRP).

The DRP rejected the contentions of the assessee and passed an order. Aggrieved by the assessment order, the assessee filed an  appeal before the Tribunal.

Sandeep Bhalla, counsel for assessee submitted that  assessee did not have any permanent establishment in India. Thus, the fabrication charges received are not taxable in India since the company does not have any Permanent Establishment or Business Connection in India.

Further the counsel for assessee submitted that  services rendered by the company did  not make available any technical knowledge, skills, experience etc either to OCIPL or to Owens Corning Industries India Pvt. Ltd and hence does not fall within the definition of fees for included services' as per Article 12(4)(b) of the DTAA.

Soumendu Kumar Dash Counsel for the revenue, supported the decision of the lower authorities . After considering the facts and contentions of the both parties, the two member bench of the  B.R. Baskaran, Accountant Member) and Pavan Kumar Gadale, (Judicial Member ) held that fabrication charges received by the assessee from its AE did not fall under the purview of fees for technical services .Thus the bench allowed the appeal filed by the appeal.

To Read the full text of the Order CLICK HERE

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