The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that the cost reimbursement of received by the assessee towards providing support services is taxable as fees for technical services both under Section 9(1) (vii) of the Income Tax Act,1961 as well as Article 12(4) of the Double Taxation Avoidance Agreement (DTAA) between India and USA.
The assessee Kraft Heinz Foods Company (merged with M/s H. J. Heinz Company to form Kraft Heinz Food Company) is a resident of USA, filed its return of income at Rs.NIL. The return was picked up for scrutiny. The Assessing Officer (AO) issued show cause notice that why the support services receipt should be taxed as fees for technical services (FTS).
The Assessing Officer rejected the contention of the assessee and held that service fee would be subject to tax at the rate of 10% as the services performed by the assessee qualify as fees for technical service by the Act and the Double Taxation Avoidance Agreement between India and USA. Hence treated the the gross amount received by the assessee as Fees For Technical Services amounting to ₹9,82,61,852/- chargeable to tax at the rate of 15%.
Aggrived by the order the assessee filed an appeal before the Dispute Resolution Panel which confirmed the order of the AO. Further aggrieved the assessee filed an appeal before the Tribunal.
The Authorized Representative of the assessee Manthan Shah stated that the appeal for Assessment Year (AY) 2009-10 and for A.Y. 2011-12 were heard and disposed off by Bench of ITAT at New Delhi and claimed that there are certain errors in the order of the coordinate Bench for A.Y. 2009-10 and 2011-12 against which Miscellaneous Application has been filed.
The Departmental Representative Surabhi Sharma, contended that this issue has already been covered and decided in assessee’s own case against the assessee. Even, assessee does not say that there is a difference between the facts stated for these two years with the present two years. Therefore, these appeals should be concluded by following that order.
The bench comprising of Prashant Maharishi, Accountant Member and Rahul Chaudhary, Judicial Member perused the orders of the co-ordinate bench in assessee’s own case for A.Y. 2009-10 and 2011-12. Accordingly, the action of the Assessing Officer holding that the cost reimbursement of Rs.10,03,78,345/- received by the assessee towards providing support services was taxable as fees for technical services both under Section 9(1) (vii) of the Income Tax Act as well as Article 12(4) of the Double Taxation Avoidance Agreement (DTAA) was confirmed.
Hence the grounds of appeal by assessee were dismissed.
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