2021 (9) TMI 1431 - AT - Income Tax

Income deemed to accrue or arise in India - action of the AO in treating the BTIN as fixed place PE of the assessee under Article 5(1) of the Indo-Sweden DTAA - HELD THAT - This issue is squarely covered by the order of the Co-ordinate Bench of ITAT in the assessee s own case 2020 (10) TMI 1205 - ITAT DELHI held that the entire findings of the DRP are based on erroneous appreciation of wrong facts and on such erroneous appreciation of wrong facts, the DRP held that BTIN is the PE of the appellant in India without appreciating the true facts that the appellant has no place of disposal in India in the office of BTIN from where the appellant could have conducted its business in India. TPO has examined the international transactions and has accepted the same to be at ALP, we do not find any merit the additions made by the DRP. We accordingly, direct the AO to delete the addition of income attributable to PE - Decided in favour of assessee. Non-treatment of the managerial services as Fee for Technical Services - HELD THAT - As decided in own case 2020 (10) TMI 1205 - ITAT DELHI intermediary services rendered by the appellant do not make available any technical knowledge, skill etc to BTIN and BTIN is not a equipped to apply technology contained in services rendered by the appellant. The intermediary services provided by the appellant to BTIN do not tantamount to FTS and accordingly, shall not be taxable in India. Appeals of the assessee are allowed.

Summary

Issues:
1. Appeal against treating BTIN as fixed place PE of the assessee under Article 5(1) of the Indo-Sweden DTAA for A.Ys. 2013-14 & 2015-16.
2. Appeal against nontreatment of managerial services as "Fee for Technical Services" for A.Y. 2013-14.

Issue 1:
The assessee appealed against the action of the AO in treating the BTIN as a fixed place Permanent Establishment (PE) under Article 5(1) of the Indo-Sweden Double Taxation Avoidance Agreement (DTAA) for the assessment years 2013-14 & 2015-16. The ITAT noted that the issue was previously adjudicated in the assessee's own case by a Co-ordinate Bench of ITAT, where it was held that the findings of the Dispute Resolution Panel (DRP) were based on erroneous appreciation of facts. The ITAT found that the appellant had no place of disposal in India through BTIN to conduct business. Additionally, considering the totality of facts and the Transfer Pricing Officer's acceptance of international transactions at Arm's Length Price (ALP), the ITAT allowed the appeal of the assessee, directing the Assessing Officer to delete the addition of income attributable to PE.

Issue 2:
The revenue appealed against the nontreatment of managerial services as "Fee for Technical Services" for the assessment year 2013-14. This issue was also previously addressed by the ITAT for the assessment year 2011-12. The ITAT referred to the previous order where it was held that the intermediary services provided by the appellant did not make available any technical knowledge or skills to BTIN. The ITAT emphasized that for a service to be considered Fee for Technical Services (FTS), it should result in transmitting technical knowledge for the payer's enduring benefit. The ITAT concluded that the intermediary services did not amount to FTS as they did not make technical knowledge available to BTIN, and thus were not taxable in India. Therefore, the ITAT dismissed the revenue's appeal on this ground.

In conclusion, the ITAT allowed both appeals of the assessee and dismissed the revenue's appeal. The orders of the ld. CIT(A) were overturned based on the specific legal interpretations and factual considerations outlined in the detailed analysis for each issue. The judgment was pronounced in the open court on 27/09/2021 by the Bench comprising Sh. Kul Bharat, Judicial Member, and Dr. B.R.R. Kumar, Accountant Member.