2023 (5) TMI 1001 - AT - Income Tax

Income deemed to accrue or arise in India - denial of benefit of the India-UK Double Taxation Avoidance Agreement (“DTAA”) - HELD THAT:- We find that Tribunal in assessee’s own case in Linklaters LLP [2019 (6) TMI 1502 - ITAT MUMBAI] rendered similar findings. Similarly was held by the coordinate bench of the Tribunal in assessment years 2015-16 and 2016-17 in assessee’s own case [2020 (11) TMI 733 - ITAT MUMBAI], [2023 (3) TMI 912 - ITAT MUMBAI].

DR could not show us any reason to deviate from the aforesaid decisions rendered in assessee’s own case and no change in facts and law was alleged in the relevant assessment year - we uphold the plea of the assessee that it is entitled to claim the benefit under the India-UK DTAA. Grounds raised in assessee’s appeal are allowed.

Taxability of income received by the assessee as ‘Fees for Technical Services’ under the provisions of the India-UK DTAA - HELD THAT:- Since in the year under consideration also the assessee rendered similar services in the nature of purely legal advisory, wherein it cannot be said that any technical knowledge, experience, skill, know-how, or processes can be utilised by the client in the future without the aid of the assessee, therefore, the services rendered by the assessee cannot be said to have ‘made available’ the technical knowledge, skill, experience, know-how or process, etc. to the recipient of services. Thus, respectfully following the decision of the coordinate bench of the Tribunal rendered in assessee’s own case [2017 (2) TMI 779 - ITAT MUMBAI] we are of the considered view that income received by the assessee is not in the nature of ‘Fees for Technical Services’ as envisaged under Article 13 of the India-UK DTAA. As a result, grounds raised in assessee’s appeal are allowed.

Existence of the Permanent Establishment (“PE”) in India in terms of the provisions of the India-UK DTAA - HELD THAT:- From the perusal of the submission dated 02/12/2016 filed by the assessee before the AO, forming part of the paper book from pages 9-22, we find that employees of the assessee were present in India for rendering services for a period aggregating to only 13 days. This fact was also reiterated by the assessee before the learned DRP. However, the same has not been controverted.

Even in the final assessment order pursuant to the directions issued by the learned DRP, the AO has not denied the aforesaid fact - we are of the considered opinion that the assessee does not have a PE in India under the provision of the India-UK DTAA, during the year under consideration.

Since the assessee neither has a PE in India nor the income is found to be in the nature of ‘Fee for Technical Services’ under the provisions of the DTAA, therefore, the said income cannot be brought to tax in India, even under the provisions of the Act in view of the provision section 90(2) of the Act. As a result, grounds raised in assessee’s appeal are allowed.

Taxability of reimbursement of expenses received by the assessee - HELD THAT:- From the perusal of the record, it is evident that the Revenue has not disputed the fact that out of the total amount of Rs.50,29,148 invoiced by the assessee, the amount of Rs.1,33,099.54 pertains to the reimbursement of travel and hotel accommodation.Assessee has also provided the breakup of this disbursement and the clients from whom the same was charged. Since the disbursements are not in the nature of income and are only reimbursement of actual expenditure incurred by the assessee, therefore same cannot be chargeable to tax. As a result, grounds raised in assessee’s appeal are allowed.