Just a moment...

Report
FeedbackReport
Bars
×

By creating an account you can:

Logo TaxTMI
>
Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2020 (11) TMI 733

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ties below have erred in applying the provisions of the Act as if the assessee is an individual resident. Since, the assessee is a Limited Liability Partnership firm it has a distinct identity. The authorities below have further erred in coming to the conclusion that the remuneration received by the assessee from provision of legal services is in nature of 'Fee for Technical Services' (FTS) within the meaning of Clause 13(4)(c) of India - UK DTAA. 2.1. The ld. Counsel for the assessee submitted that though in the grounds of appeal the assesse has raised multiple grounds, however, the primary issues that would emerge from the grounds raised in the present appeal for adjudication are:- (i) Whether the provisions of DTAA or the provisions of Income Tax Act, 1961 would apply in the facts of present case? (ii) Whether the remuneration received by assessee for providing legal Services is in the nature of 'Fee for Technical Services'? (iii) Whether the income received by the assessee is taxable under Article-15 of India - UK DTAA? (iv) Whether the assesse has permanent establishment (PE) in India? 2.2. The ld. Counsel submitted that the issue whether the assesse would be eligibl....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tion has decided all primary issues in favour of the assesse in appeals before the Tribunal i.e. ITA NO.1540/Mum/2016 for assessment year 2012-13 decided on 29-8-2018 and ITA No. 969/Mum/2017 for assessment year No.2013-14 decided on 21-6-2019. The ld. Counsel for the assessee placed on record copy of the orders of Tribunal in ITA No.1690/Mum/2015, ITA No.1540/Mum/2016 and ITA No.969/Mum/2017 (supra). 3. Shri Sanjay Singh, representing the Department vehemently defended the assessment order. However, the ld. Departmental Representative fairly admitted that the issues raised in the present appeal by the assessee were subject matter of appeal by the assessee in the preceding assessment years. The ld. Departmental Representative further contended that in so far as the issue of treating income of the assessee as 'Business Income' under Article-7 of the DTAA, to examine assessee's PE status, it would be necessary to verify duration of total period of stay of the assessee's employees/personnel in India. The issue can be restored to Assessing Officer for verification. 4. We have heard the submissions made by rival sides and have perused the orders of authorities below. The assessee in....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....AA & Whether the remuneration for services rendered by the assesse are in the nature of FTS: 7. In the immediately preceding assessment year i.e. A.Y. 2013-14, the Tribunal decided the issue regarding applicability of the provisions of the Act vs DTAA in the case of assessee and also whether the remuneration received by the assessee is in the nature of 'Fee for Technical Services' or not. The relevant extract of the findings of the Tribunal on this issue are as under:- "12. In grounds no.13 to 15, the assessee has challenged the denial of India-U.K. Tax Treaty benefit. 13. The Assessing Officer denied benefit to the assessee under the India-UK Tax Treaty on the ground that income of the assessee is not taxable in UK, hence, it cannot be treated as a resident of UK under Article-4(1) of the India-UK Tax Treaty. 14. The learned Sr. Counsel for the assessee submitted, identical issue arose in assessee's own case for the assessment year 2012-13 and the Tribunal while deciding the issue has held that benefit under India-UK Tax Treaty is available to the assessee. 15. The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assesse....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... many judgements as discussed above, we are not in a position to agree with the view taken by the Revenue and thus hold that the income of the assessee would not fall in the category of "Fee for Technical Services" as envisaged in Article 13 of India-UK DTAA. Further, since this amount is not taxable under DTAA as FTS, it cannot be brought to tax as FTS as per provisions of section 9 of the Income Tax Act, 1961, in view of section 90(2) of the Act, as discussed above. Thus, with these observations, Grounds 9 to 9.6 are allowed." 10. Facts being identical, following the aforesaid decision of the Co- ordinate Bench, we hold that the income received by the assessee not being in the nature of FTS as envisaged under Article-13 of the India- UK DTAA, cannot be brought to tax by applying the provisions of section 9(1)(vii) of the Act, since, the assessee is entitled to claim the benefit of India-UK DTAA. In view of the aforesaid, grounds no.6 and 7 are allowed and the issues raised in ground no.5 having become redundant will not require adjudication." 17. Facts being identical, following the aforesaid decision of the Co- ordinate Bench, we decide the issue in favour of the assessee." ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... not have a PE in India during the year under consideration. For the sake of completeness the relevant extract of the Tribunal order in AY 2013-14 is reproduced herein below: "10. We have considered rival submissions and perused the material on record. Though, the learned Departmental Representative has made an attempt to make out a case by interpreting the expression "any twelve months period" as used in Article- 5(2)(k)(i) of the India- U.K. Tax Treaty in a different manner, however, we are not impressed with the same. In our considered opinion, the issue is squarely covered by the decision of the Co-ordinate Bench in assessee's own case for the assessment year 2012-13 in ITA no.1540/Mum./2016, dated 29th August 2018. While dealing with the aforesaid issue, the Tribunal has held as under:- "14. We have considered rival submissions and perused materials on record. Undisputedly, the issue raised in this ground was never agitated by the assessee either before the Assessing Officer or before the DRP. Thus, this ground raised by the assessee has to be treated as an additional ground. However, considering the fact that the issue raised in this ground is a purely legal issue, si....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d that the employees and personnel of the assessee were situated in India for rendering services for a period aggregating to 77 days. Since, the aforesaid factual aspect has not been verified by the Departmental Authorities as the assessee did not raise this issue before them, we are inclined to restore the issue to the Assessing Officer for adjudication keeping in view of our observations herein above and only after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes." 11. Facts being identical, we do not find any reason to deviate from the aforesaid decision of the Co-ordinate Bench. Therefore, respectfully following the decision cited supra, we direct the Assessing Officer to verify as to whether the employees/personnel of the assessee were situated in India for rendering services for a period not exceeding ninety days during the previous year relevant to the assessment year under dispute and if it is found to be so, then, it has to be held that the assessee did not have a PE in India during the year under consideration. This ground is allowed subject to factual verification as indicated above. In the light of above, in principle we....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... under:- "35. We have gone through the orders passed by the lower authorities and also Article 15 of India-UK DTAA. It is noted by us that Article 15 of DTAA deals with taxability of independent personal services. This Article starts with the words "Income derived by an individual.......in respect of professional services or other independent activities of similar character........"It is noted by us that Article 15 shall be applicable for determining taxable income in the hands of individual and not other persons. The assessee is certainly not an Individual. Thus this Article cannot be made applicable on the assessee being not an individual. Similar issue had come up before the Tribunal in the aforesaid case of M/s Linklaters (for AY 1995-96) wherein the Tribunal held at para 106 of the order that Article 15 shall be applicable only when services are rendered by an individual. Thus, respectfully following the order of the Tribunal it is held that impugned amount of fee received by the assessee would not be liable to be taxed under Article 15 of India-UK DTAA. Thus, Grounds 10 to10.5 are allowed in favour of the assessee." 24. Facts being identical, respectfully following the ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....idered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only inconsonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon'ble Bombay High Court itself has, vide judgment dated 15th April 2020,....