The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the lower authorities have rightly treated the amounts received by the assessee from RCITP as fees for technical services under Article 12 (4) of Indo – Singapore DTAA and was rightly brought to tax at 10%.
the assessee is a tax resident of Singapore and is in the business of providing design services to customers in the Asia Pacific region. During the assessment year under consideration the assessee has provided the services to its Indian Associated Enterprises – Gensler Design India Pvt. Ltd. This service included designs, technical and consulting services, marketing support services and services related to evaluation of certain project properties.
Receipts in lieu of these services have been offered to tax as Fees for Technical Services (FTS) @ 10% in accordance with Article 12 of Indo Singapore DTAA. In the course of assessment the Assessing Officer noticed that the assessee has received Rs.2,90,89,423/- from Reliance Corporation IT Park Limited (RCITP) and in Form 26AS it is reflected that TDS @ 10% has been deducted by the payer on the said amount.
Assessee was asked to explain why the said receipts have not been included in the taxable income. Assessee stated that the income received from RCITP is not taxable as per the Treaty. The assessee contended that the remittance being RCITP is towards design services and this service cou be considered to be technical in nature and the remittance for these services cou be categorized as fees for technical services as per Explanation 2 to section 9(1)(vii) of the I.T. Act.
It was further contended that the proposed remittance being payment towards technical services received wou not be categorized as fees for included services as per Article 12(4) of the treaty as the services do not make any technical know-how, experience, skill know-how or process which enable the person acquiring the services to apply the technology contained therein.
However, not convinced with the submissions and contentions of the assessee the Assessing Officer he that from perusal of work order it is clear that the role of the assessee involved development and transfer of a technical plan and technical design to RCITP while applying or has applied into the final making of its buiing.
The designs and plans are supplied by the assessee along with the transfer of the technical plan or design. RCITP also acquired the rights to apply into its project the technology enhancement the design or blue print. On analyzing the work order the Assessing Officer concluded that the said receipts get covered in the scope and ambit of the term ‘fees for technical services’ as laid down in Article 12 of the Treaty.
The Assessing Officer also concluded that the receipts are also covered in the scope of clause (b) of clause 4 of Article 12 because through its work as interior designer for the RCITP Twin Tower Project the assessee is making available a technical process to the client as interior designs or plans also describe the process by which his design or blue print will come to actual realization. Thus, the Assessing Officer in the draft assessment order dated 28.12.2018 passed under section 144C of the Act he that the income of Rs.2,70,89,423/- is in the nature of fees for technical services both under the Income Tax Act and the Indo – Singapore DTAA.
This technology was a combined product of the expertise of the assessee and inputs acquired from the clients and got embedded into the technical designs or plans that were made by the assessee. The DRP he that when the client uses the designs it uses the technology i.e. enhancement in the designs and plans and, therefore, the requirements of Article 12 of the DTAA are met.
After hearing both the parties, the tribunal held that the assessee is making available RCITP all reports, analysis, tests, tables, plans, drawings or other documents in any form including electronic or printed form for the use of RCITP which enables RCITP to apply and use all these deliverables for its business purposes which specifies the conditions of sub clause (b) and (c ) of clause (4) of Article 12 of Indo – Singapore DTAA.
The two member bench consisting of N.K Billaiya (Accountant member) and C.N Prasad (judicial member) held that the payments received by the assessee from RCITP are fees for technical services falls under sub clause (4) of Article 12 of Indo – Singapore DTAA. Thus, the lower authorities have rightly treated the amounts received by the assessee from RCITP as fees for technical services under Article 12 (4) of Indo – Singapore DTAA and was rightly brought to tax at 10%.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
