TMI Blog2022 (12) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly. - Decided in favour of assessee. - ITA No. 6529/Mum/2018 ITA No460/Mum/2022 - - - Dated:- 26-12-2022 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER For the Appellant : Ms. Megha Shah, AR For the Respondent : Sh. Soumendu Kumar Dash, Sr. DR ORDER PER GAGAN GOYAL, A.M: These two appeals by assessee are directed against the order of Dispute Resolution Panel-2 [for short DRP ] vide orders dated 28.08.2018 27.01.2022 for Assessment Years (AY) 2015-16 2018-19 respectively. We shall first take up appeal of assessee for A.Y. 2015-16 as lead case. The assessee has raised the similar grounds of appeal for both the AYs except variation of amounts in figures, which are as under: 1:0 Re: Treating the fabrication charges received as fees for technical services: 1:1 The Assessing Officer / the Dispute Resolution Panel has erred in taxing the amount of Rs. 9,11,78,540/- received by the Appellant during the year under consideration as fabrication charges as 'fees for technical services'. 1:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 9(1)(vii) of the Income-tax Act, 1961 as well as Article 12 of the Double Taxation Avoidance Agreement entered between India and Singapore (India-Singapore Tax Treaty ) 2. The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, the fabrication charges received by it are not fees for technical services either under the Income-tax Act, 1961 or under the provisions of the India-Singapore Tax Treaty. The stand taken by the Assessing Officer / Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with the law. 3. The Appellant submits that the Assessing Officer be directed to delete the addition of Rs. 9, 14, 87,876 so made and to re-compute its total income accordingly. Re: Levy of interest under section 2348 of the Income-tax Act, 1961: 1. The Assessing Officer has erred in levying interest under section 234B of the Income-tax Act, 1961. 2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, no interest under section 234B is leviable and the stand taken by the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/texture of the filaments, thereby leading to glass leakage. b. The average life of the bushing is around 250 days approx. however premature failures are common in the manufacturing process/operation. c. Therefore the bushings are required to be furbished/fabricated periodically (ideally after 250 days). d. Hence Owens Corning India Pvt. Ltd (OCIPL) (hereinafter to be read as OCIPL) sends the bushings by air to 'Owens Corning (Singapore) Pte Ltd for fabrication. e. In the process of re-fabrication, the existing bushing is melted, additional alloy is added to the extent required to form altogether a new bushing of desired specification etc. Hence the bushings sent to OCIPL lose their individuality/originality or distinctiveness after every re fabrication. OC Singapore inter alia carries out the following processes in relation to the bushings received by it from OCIPL Cutting the bushings into smaller pieces. Melting the pieces to form ingots. Rolling the ingots into sheet stock. Cutting the sheet stock as per specifications. Punching the sheet to form the components of the final bushings viz end plates, ears, rails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. 10. According to Owens Corning Singapore, the fabrication charges were offered as FTS by them up to AY 2011-12 (F.Y. 2010-11). However in A.Y 2015-16 they have not offered the same for taxation stating that these fabrication charges received are not taxable in India since the company does not have any Permanent Establishment or Business Connection in India. Also these charges are not for any equipment and hence cannot be said to be Royalty in terms of Article 12(3) of the DTAA between India and Singapore. The assessee further states that the same cannot be classified as 'Fees for technical services' for the following reasons: a) The assessee has not granted any right, property or information to any Indian company in terms of Para 3 or Article 12 and hence the fees received do not fall within the definition of fees for included services as per Article 12(4)(a) of the DTAA. Since as per Article 12(4)(a) of the DTAA 'Fees for Included Services' should be ancillary or subsidiary to the application or enjoyment of the right or property or information for which a payment described in Para 3. b) Also the services rendered by the company do not make avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technology inherent in the process of rendition of these services, and, it is not even, therefore, the case of the authorities below that the fees received by the assessee can be taxed under article 12(3)(b) of the Indo Singapore tax treaty; their case is confined to the application of Article 12(4)(a) of the Indo Singapore tax treaty which provides that (t)he term fees for technical services as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received . On the facts of this case, it is also not in dispute that no such payments, were made to the assessee by its Indian affiliate, which will be covered by Article 12(3) of the Indo-Singapore tax treaty. Yet, taxability under Article 12(4)(a) is invoked, on the ground that one of the group companies, i.e. OC-US, has received such payments from the Indian affiliate. OCIPL, which are covered by Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent jurisdictions. It is also not even the case of the revenue authorities that the refurbishing work is not carried out in Singapore. While a lot of emphases is paid by the revenue authorities on the fact that on the same transaction the assessee had paid taxes in India in the immediately preceding year, and the fact that it is part of overall common arrangements that the leasing is done from one jurisdiction and the refurbishing or bushing is done is another jurisdiction. Nothing, however, turns on these arguments also. The acceptance of tax liability in one year does not constitute estoppel against the assessee for the other years, and it is for the group to organize a multinational group to organize its activity, as long as it is a bonafide arrangement, in a manner as deemed commercially expedient. The question that we have to really consider is whether or not the activity leading to income was actually carried out in that jurisdiction, and there is no dispute on that aspect at all. The fact that an arrangement regarding situs of entities providing different facilities, in connection with a transaction of the multinational group, is done in a tax-efficient manner, cannot be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
