TMI Blog2023 (2) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with P G India. The said work has been outsourced to IBM Philippines. IBM Philippines is carrying out the work described in the agreement between IBM India and P G India. Hence, IBM Philippines was not rendering any technical service and therefore, the income in the hands of IBM Philippines is a business income. Whether ITAT was right in holding that DTAA does not define FTS? - Revenue has taken a specific contention that FTS was absent under the India-Philippines Treaty. Further, it is also not in dispute that under the agreement, IBM Philippines was rendering service in the field of payroll, data management etc., in connection with the work/assignment described in the agreement between IBM India and P G India. ITAT has, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstance of the case, and in law the Tribunal was correct in holding that payroll services rendered by IBM Philippines to the assessee is not Technical Services but constitute business profits and hence Section 195 of the Act is not attracted? 2. Whether on the facts and in the circumstance of the case, and in law the Tribunal was correct in holding that IBM Philippines has rendered services to the assessee in the course of business carried on by it and hence payment received is business profits in the hands of the IBM Philippines and the same is not taxable in India as the recipient company has no permanent establishment in India? 3. Whether on the facts and in the circumstance of the case, and in law the Tribunal was correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The CIT(A) [Commissioners of Income Tax (Appeals) vide order dated February 2, 2013.] confirmed AO s order. Assessee challenged the said order before the ITAT [Income Tax Appellant Tribunal] . By the impugned order, the ITAT has allowed the appeal holding that the payments made by the assessee were not chargeable to tax under the India-Philippines DTAA [Double Taxation Avoidance Agreement required to be deducted. Hence, this appeal by the Revenue.] and hence, no tax was 4. Shri. K.V Aravind, Learned Senior Standing Counsel for the Revenue, assailing the impugned order submitted that: the service rendered by IBM Philippines falls under the category of managerial and consultancy services. Data management is also one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied. In support of his contention, he relied upon Union Of India v. Azadi Bachao Andolan [[2003] 132 Taxman 373 (SC)] . 7. With the above submissions he prayed for dismissal of these appeals. 8. We have carefully considered rival contentions and perused the records. 9. Undisputed facts of the case are, assessee has entered into an agreement with P G India to render certain services. It has outsourced the said assignment to IBM Philippines. Assessee pays to the IBM Philippines from out of the amount which it receives from P G India. As far as IBM Philippines is concerned, it works like a sub-contractor under IBM India. It earns profit by rendering service to P G India. It does not provide any technical service to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with the work/assignment described in the agreement between IBM India and P G India. 13. The ITAT has, in our considered view rightly recorded in para 8.1.3 of its order that as per Article 7(1) of Indian Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. Admittedly, there is no permanent establishment of IBM Philippines in India. As per Article 23 of DTAA, the business profit of IBM Philippines shall be taxable in that State only. Further, the CIT(A) has also held that the transactions between the assessee and IBM Philippines were in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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