The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that taxability of date processing fees paid by assessee to its overseas branch could not be treated as Fees for Technical Services (FTS) as per India France Double Taxation Avoidance Agreement(DTAA).
Assessee, BNP Paribas is a commercial bank having its head office in France. The assessee has 8 branches in India and is involved in normal banking activities including financing of foreign trade and foreign exchange transactions. The assessee filed the return of income for A.Y. 2016-17 by declaring total income of Rs.705,48,99,620/-.
During the assessment proceedings AO found that assessee has paid an amount of Rs.44,56,19,985/- towards data processing fees for the services rendered by its Singapore Branch.
The assessee had claimed the said amount net of margins as a deduction in computing the taxable income in accordance with Article 7(3)(b) or of the India France Tax Treaty.
Without considering the claim of assessee AO held that data processing fees to the Singapore branch paid by the assessee for Rs.44,56,19,985 was taxed as FTS.
Aggrieved by the order, the assessee filed an objection before the Dispute Resolution Panel l(DRP), who dismissed the objection sl. Therefore the assessee filed another appeal before the tribunal.
Before the bench Farrokh Iran, counsel for the assessee submitted that, within the Singapore Branch of the assessee a separate unit Asia Regional Computer Centre (ARCC) was established in the year 2000 to serve as a single point contact for data processing, providing technical support, system management and assistance in all technical issues for all operating units of BNP Paribas group across Asia Pacific Region including India.
BNB India branch and the ARCC have additionally executed a memorandum of understanding for understanding the nature of service to be provided by the ARC to BNP India branch and to affirm that the services have indeed been provided in the manner agreed in MOU.
Further assessee contended that since the transaction is between two branches of the same entity no income accrues to the assessee towards the payment.
Thus the data processing charges are also not taxable in India and the same do not constitute ‘fees for technical services’ under Article 13 of the India-France Double Taxation Avoidance Agreement (‘DTAA’) read with clause 7 of the Protocol to the DTAA.
Accordingly counsel submitted that this issue is also covered by the decision of the co-ordinate bench in assessee’s own case for A.Y. 2014-15 and Bombay High Court in assessee’s own case for A.Y. 2006-07 to 2009-10 has considered the similar issue and held in favour of the assesse.
Sandeep Raj , Counsel for the revenue, supported the decision of lower authorities.
The tribunal observed that the coordinate bench and bombay high court considered the similar issue and held in favour of the assessee .
After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Vikas Awasthy, (Judicial Member) held that payment made by the assessee to Singapore branch cannot be treated as FTS.
Therefore, the above ground raised by the assessee was allowed the tribunal.
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