Fee for providing Supervisory Service for manufacturing of linear polyethylene under Composite Contract are FTS under UK and India DTAA: ITAT upholds Revision Order [Read Order]

The Income Tax Appellate Tribunal (ITAT) Kolkata bench held that Fee for providing supervisory services for manufacturing of linear polyethylene under composite contract are Fee For Technical Service (FTS) under UK and India Double Taxation Avoidance Agreement. Thus the bench upheld the revision order Asseesee entered into a composite contract, which could not  be segregated in parts and, therefore, rightly found the assessment order as erroneous.

Assessee Ineos Commercial Services UK Limited,return of income was filed on 31.10.2017 declaring total income of Rs.4,42,58,223/-. Thereafter the assessee case was selected for scrutiny. Accordingly the assessment order was passed.

Commissioner perused the record and order of theAssessing Officer, thereafter formed an opinion that the assessment order is erroneous as much as it caused a prejudice to the interest of the revenue . Thus issue notice under section 263 of Income Tax Act.

During the revision proceedings it was observed that the assessee entered into an agreement with Brahmaputra Cracker and Polymer Limited (BCPL) . which license for manufacture of linear polyethylene in Assam and its sale across the world.

The assessee actively helped BCPL in setting up the production process including training of its manpower, providing expert as well as supervision and commissioning services.

Thus these fees are not offered tax by the assessee which was not  examined by the AO during the assessment proceedings .

When the matter came before the tribunal assessee submitted  assessee has received fees towards supervisory charges and since it has not made available technical knowledge about providing of these supervisory charges, therefore, under Article 13 of India-UK Treaty, this receipt will not fall in the ambit of FTS and not taxable. 

Department representative submitted that the Commissioner of Income Tax  CIT has examined in detail the assessment  order and thereafter formed an opinion that it is a composite contract, which could not  be segregated in parts and, therefore, rightly found the assessment order as erroneous.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Rajesh Kumar ,(Accountant Member ) and  Rajpal Yadav, (Vice-President) observed that Fee for providing supervisory services for manufacturing of linear polyethylene under composite contract are Fee For Technical Service (FTS) under Uk and India Double Taxation Avoidance Agreement.

Rahul Shah,counsel appeared for assessee and Abhijit Kundui, counsel appeared for the revenue.

To Read the full text of the Order CLICK HERE

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