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TMI Blog2025 (5) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... s for technical services' in terms of section 9(1Xvi) 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"). 1.2 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 AO / DRP in this regard is erroneous, misconceived and not in accordance with the law. 1.3 The Appellant submits that the AO be directed to delete the addition of Rs. 18,73,16,820 so made and to re-compute its total income accordingly. 2.0 Re: Taxing income from fees for technical service at the rate specified under the Act: 2.1 Without prejudice, The AO erred in charging tax at the rate of 10% plus surcharge and health and education cess under section 115A of the Act on income from fees for technical services of Rs. 18,73,16,820. 2.2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian associated enterprises, namely OCIPL, as non-taxable in India as the assessee has neither any Permanent Establishment in India as per Article 5 of the India-Singapore DTAA nor any business connection in India. It was further observed that in the assessment years 2015-16 to 2021-22, this income was also treated as FTS and taxed as per the Act during the scrutiny assessment proceedings. Accordingly, the assessee was asked to show cause as to why a similar disallowance should not be made in the year under consideration. In response, the assessee submitted that in order to fall within the purview of Article 12(4)(a) of the India-Singapore DTAA, the services rendered should be ancillary and subsidiary to the application or enjoyment of the property for which a "Royalty" payment is received. The assessee submitted that in the instant case, no Royalty is received by the assessee under Article 12(3) of the India-Singapore DTAA. It was submitted that the assessee does not enjoy any know-how or patent rights for the manufacturing of specialised glass fibre, and there is no Royalty received by the assessee to which the said services could be called ancillary. Accordingly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee in order to keep the issue alive and to protect the interest of the Revenue. 7. In conformity with the directions issued by the learned DRP, the AO vide impugned final assessment order dated 26/12/2024, assessed the fabrication charges received by the assessee as FTS under section 9(1)(vii) read with Article 12(4) of the India-Singapore DTAA. Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative submitted that a similar issue has been decided in favour of the assessee by the coordinate bench of the Tribunal in assessee's own case for the preceding years. The learned Authorised Representative further submitted that the learned DRP did not grant relief to the assessee merely to keep the issue alive. 9. On the other hand, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities. 10. We have considered the rival submissions and perused the material available on record. We find that the issue of whether the fabrication charges received by the assessee from its Indian associated enterprise, i.e. OCIPL, is taxable as FTS under the provisions of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments from the Indian affiliate. OCIPL, which are covered by Article 12(3) of Indo- Singapore tax treaty, and by invoking Article 9. The stand of the Assessing Officer and the DRP is that since the alloys are provided by the OC-US, which is an associated enterprise under article 9, one has to proceed on the basis that the alloys are provided by the assessee, and as the services are "ancillary and subsidiary to the application or enjoyment of the right, property or information" for which payment is made to OC-US, these services are taxable as fees for technical services. 11. As far as the role of Article 9 is concerned, it comes into play when "conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises" and remains confined to bringing those profit for taxes which, but for such arrangements, an enterprise in the respective tax jurisprudence would have made. The scope of Article 9 thus is to neutralize the impact of intra- AE relationship vis-à-vis the profits made in dealings with such an AE. Beyond this limited scope, the application of Article 9 cannot re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinational group, is done in a tax-efficient manner, cannot be reason enough to disregard the arrangement. We are satisfied that so far as the income of the assessee from the refurbishing of the bushes is concerned, it is not taxable in India as the provisions of Article 12(3) cannot be invoked in this case, and that, so far as the provisions of Article 12(4)(a) are concerned, these provisions cannot be invoked as the assessee has not rendered these services in connection with the services "for which a payment described in paragraph 3 is received" by the assessee. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and delete the impugned addition of Rs. 4,84,44,048. The assessee gets the relief accordingly." 11. We find that following the aforesaid decision, similar findings were rendered by the coordinate benches of the Tribunal in assessee's own case for the assessment years 2015-16, 2018-19, 2019-20, 2020-21, and 2021-22. 12. The learned Departmental Representative could not show any reason to deviate from the aforesaid orders, and no change in facts and law was alleged in the relevant assessment year. The issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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