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2023 (9) TMI 107 - AT - Income TaxIncome accrued in India - Determination of taxable income under the head “IT Services” - levy of taxation on the alleged receipt for sale of IT Services as FTS - as per assessee no permanent establishment in India and the services were performed outside India in Finland, thus these receipts in lieu of IT Services are not taxable as FTS in the hands of the assessee - HELD THAT:- As decided in assessee own case [2019 (6) TMI 777 - ITAT KOLKATA] Tribunal has recorded the finding that no doubt the assessee has no permanent establishment in India and these services were also rendered outside India but the services has been used in India and, therefore, it is taxable in India. The ITAT as well as DRP has made reference to Article 12(5) of India-Finland DTA in this connection. During the course of hearing, we asked the ld. Counsel for the assessee to show how these services available for everybody and anybody can claim it over the counter. These are specific services for the entities of the assessee only, which are to be used in their respective organisation between different countries. Therefore, as far as the user of the services in India is concerned, their fees paid for such user in India deserve to be taxed in India. DRP has observed that there is no clause to make available in the treaty between India and Finland. According to which, it was not necessary upon the assessee to make the technology available to Indian entity and only then the receipt would be taxable. Without making it available, if the technology has been used, then also, on those receipts, the assessee has to pay taxes. Whether receipt received in the shape of guarantee fees deserves to be taxed in India within the meaning of Article 21 of India- Finland Treaty? - According to the ld. DRP, the activities of giving of guarantee are only a routine activity. It is an obligation to its subsidiary being the owner of the subsidiary. Hence it is more likely to be a shareholders’ obligation/service than business activity. The ld. DRP has held that it is not a business activity and we do not find any error in this finding of the ld. DRP. Because except its subsidiary, the assessee has not given Bank Guarantee to anybody else, which can establish that it was engaged in the business of providing Bank guarantee. It was just only safeguarding the business interest of a subsidiary and providing them this type of guarantee. The commission income earned on providing such guarantee is taxable under the head “income from other sources”. The ld. DRP has rightly dealt with the issue and rightly directed the ld. Assessing Officer to tax it under the head “income from other sources” as per Article 21. Additional ground of appeal - interest receipts on refund - as under Article 11 of DTA, this interest income ought to have been assessed @ 10%, which has not been considered by the revenue authorities - On due consideration of the record, we find that there is no discussion on this point in the impugned order of the ld. DRP as well as of the ld. Assessing Officer. Therefore, we remit this issue to the file of ld. Assessing Officer for re-adjudication. The ld. Assessing Officer shall take into consideration the order of the ITAT [2023 (3) TMI 353 - ITAT KOLKATA] in the assessee’s own case.
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