Relief for Charles River Laboratories Inc: Karnataka HC Rejects Revenue’s Appeal on FTS Taxability Under India-USA DTAA Citing Tax Effect Below ₹2 Crore [Read Order]

The Revenue-appellant appealed against the Income Tax Appellate Tribunal (ITAT) order dated 01.06.2023 passed by the Bengaluru Bench,in IT(IT)A.No.37/Bang/2023 for the assessment year 2013-14 in the case of Charles River Laboratories Inc,respondent-assessee,

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The appeal raised questions on whether the services provided qualified as Fees for Technical Services under Section 9(1)(vii) of the Income Tax Act and Article 12 of the India-USA DTAA. The Revenue argued that the tribunal erred in concluding that the “make available” clause was not satisfied, that the receipts did not amount to FTS, and that reliance on the Beers Minerals P. Ltd. decision was misplaced since it had not attained finality.

The tax effect shown in the appeal memorandum was Rs.1,02,67,696/-.

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The respondent counsel, argued that the appeal was not maintainable because the monetary limit for filing appeals had been increased to Rs. 2,00,00,000/- under Circular No. 9/2024 dated 17.09.2024. She added that the Circular applied to pending appeals before the Supreme Court, High Courts, and Tribunals.

The Revenue counsel countered that the case fell within the exceptions under clauses 3.1(l) and (ii) of Circular No. 5/2024 dated 15.03.2024, as it arose from a DTAA matter.

Justice S.G.Pandit and Justice K.V.Aravind noted that the exception clause applied to international taxation appeals involving disputes over the applicability of a DTAA. In this appeal, however, the issue did not concern the DTAA. Consequently, the Revenue’s argument was rejected.

Since the tax effect was below Rs. 2,00,00,000/-, the Court dismissed the appeal.

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