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2021 (1) TMI 53 - ITAT MUMBAITaxability of amount received as common cost recharge as Royalty and fees for technical services (FTS) - Taxability of Consulting & Engineering Services - DRP considering common cost recharge as royalty and Fees for technical services (FTS) as per Article 13 of the India-UK Double Taxation Avoidance Agreement (‘DTAA’) - HELD THAT:- As relying on assessee’s own case for A.Y.2014-15 the amount received by the assessee on account of consulting & engineering services were to be treated as business profit and in the absence of assessee's PE in India, it could not be brought to tax. Consequently, the cost recharge which was considered to be ancillary and incidental to consulting & engineering services, was also held to be not taxable in the absence of assessee's PE in India. However, in the year before us, the assessee has already offered the consulting & engineering fees to tax which has been accepted by the revenue. Since we have admitted additional ground of appeal on this point, the issue of taxability of consulting & engineering services would go back to Ld. AO for adjudication. Logically, the issue of taxability of cost recharge, which has been treated as ancillary and incidental to consulting & engineering services, would also go back to Ld. AO for re-adjudication in the light of stand taken qua consulting & engineering services. Therefore, we deem it fit to restore both the grounds to the file of Ld. AO for re-adjudication de-novo after affording reasonable opportunity of hearing to the assessee, who, in turn, is directed to substantiate his claim and demonstrate that the facts in AY 2012-13 and in the year consideration was identical Levy of surcharge and Education Cess on tax calculated at special rates under the DTAA - HELD THAT:- The issue in dispute is squarely allowed in favour of the assessee by the Co-ordinate Bench decision of Hyderabad Tribunal in the case of RAK Ceramics UAE vs. DCIT International Taxation (2), [2019 (4) TMI 667 - ITAT HYDERABAD] wherein it was categorically held that surcharge and education cess could not be added to connotation ‘tax’ when the same is calculated as per DTAA. We find that the Hyderabad Tribunal while rendering this judgment had inturn placed reliance on the co-ordinate Bench decision of Kolkata Tribunal in the case of DIC Asia Pacific (Pte) Ltd., vs. Asst. DIT [2012 (6) TMI 686 - ITAT, KOLKATA]. No contrary decision was cited before us by the ld. DR in this regard and accordingly by respectfully following the aforesaid judicial president, the ground No.2 raised by the assessee is allowed.
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