CHARLES RIVER LABORATORIES, INC,UNITED STATES vs. DCIT, (INTERNATIONAL TAXATION), CIRCLE-2(1), BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER

IT(IT)A No. 377/Bang/2025 Assessment Year : 2012-13

M/s. Charles River The Deputy Laboratories Inc., Commissioner of 251, Ballardvale Street, Income Tax, Wilmington, International Taxation, Massachusetts 01887, Circle – 2(1), United States. Vs. Bengaluru. PAN: AAGCC2596Q APPELLANT RESPONDENT

Assessee by : Shri Chavali Narayan, CA Revenue by : Dr. Divya K.J, CIT-DR

Date of Hearing : 18-12-2025 Date of Pronouncement : 17-03-2026

ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the assessee which is a foreign company against the final assessment order dated 05/12/2024 in respect of the A.Y. 2012-13 and raised the following grounds: “On the facts and circumstances of the case and in law. the learned Deputy Commissioner of Income Tax, International Taxation. - Circle 2(1). Bengaluru ('the learned AO'), has erred in assessing the total income of the Appellant in the assessment order passed under section 147 read with section 254 read with section 144C (13) of the Income Tax Act, 1961 ("the Act") for the captioned Assessment Year ("AY").

Page 2 of 8 IT(IT)A No. 377/Bang/2025 Each of the ground is referred to separately, which may be kindly considered independent of each other. 1. Ground 1: Income earned by the Appellant erroneously characterized to be in the nature of Fees for Included Services/ Fees for Technical Services under the Act and the India — USA Tax Treaty ("Tax treaty") and is consequently subject to tax in India 1.1 On the facts and in the circumstances of the case, and in law, the learned AO erred in holding that the income earned by CRL Inc from Syngene International Limited is in the nature of Fees for Included Services ("FIS") / Fees for Technical Services ("FTS") and consequently liable to tax in India, without having due regard to Article 12(4) of the Tax Treaty. 1.2 The Hon'ble DRP/learned AO has failed to appreciate that the testing services provided by CRL Inc does not make available its services to the recipient in accordance with Article 12(4) of the Tax Treaty. 2. Ground 2: Incorrect levy of interest under section 234A of the Act On the facts and in the circumstances of the case and in law, the learned AO erred in levying additional interest under section 234A of the Act. 3. Ground 3: Initiation of penalty proceedings under section 271(1)(c) of the Act On the facts and in the circumstances of the case and in law. the learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 4. Ground 4: Initiation of penalty proceedings under section 271F of the Act On the facts and in the circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 271 F of the Act. All the above grounds are without prejudice to each other. The Appellant craves for leave to add, amend, vary, omit or substitute or withdraw any of the aforesaid grounds at any time before or at the time of hearing of the matter with the Income Tax Appellate Tribunal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case.”

Page 3 of 8 IT(IT)A No. 377/Bang/2025 2. The brief facts of the case are that the assessee is a company incorporated under the laws of United States of America and doing services which includes laboratory services through test reports. During the year, the assessee had received a payment from the Indian company viz., Syngene International Ltd. The revenue had treated the said income as chargeable to tax in India as fees for technical services and since the Indian company had not deducted the TDS, proceedings u/s. 201 were initiated on the Indian company. The Indian company filed their submissions and based on that, the revenue had alleged that the said payments are taxable under India-USA DTAA at 15%. It was further alleged that the assessee had neither paid the taxes nor the Indian company had deducted the TDS. It was also alleged that the assessee company had not filed their return of income and therefore the department deemed that the income would accrue or arise u/s. 9 of the Act in the hands of the assessee and therefore the department had reasons to believe that income had escaped assessment from the assessee. Notice u/s. 148 was issued and thereafter the assessee filed their return of income manually on 29/04/2019. Then notice u/s. 143(2) was issued and 142(1) was issued for furnishing the details called for by the AO. In the meanwhile, the assessee had also filed their return of income through the e-filing portal on 01/03/2021. The assessee initially raised its objection that the AO has no jurisdiction to initiate proceedings. Thereafter a show cause notice was issued to the assessee in which it was proposed that the laboratory charges received by them be treated as fees for technical services u/s. 9(1)(vii) of the Act and as per the DTAA. The AO had issued a draft assessment order for which the assessee filed their objections before the Ld.DRP. The Ld.DRP had rejected all the objections and confirmed the addition made by the AO in the draft assessment order. Thereafter the AO had also passed an order by confirming the said addition.

Page 4 of 8 IT(IT)A No. 377/Bang/2025 submissions made by the assessee. Subsequently, the assessment proceedings commenced and the assessee had also filed their objections to the show cause notice issued in which the assessee had relied on the Coordinate Bench order of this Tribunal in the assessee’s own case vide order dated 01/06/2023 and therefore prayed to allow the appeal. The AO not accepted the said reply on the ground that the revenue had not accepted the decision of the earlier order and filed an appeal before the Hon’ble High Court of Karnataka. Subsequently, the AO had also relied on some provisions including the note of master service agreements and concluded that the payments received by the assessee are in the nature of fee for technical services liable to be taxed in India. The AO had not considered the fact that the assessee had received the payments towards the testing charges and no make available of the skills, processes and knowledge were transferred to the Indian company in order to attract the fees for technical services. The assessee also submitted that no transfer of any technical knowledge has been taken in this transactions and in fact for each and every year, the assessee had rendered the services to the Indian company and therefore there is no transfer of any technical knowledge by the assessee to the Indian company, to term the transaction as fees for technical services as defined under the provisions. In spite of that, the AO had issued a draft assessment order proposing to impose tax on the said transactions as fees for technical services. The assessee filed their objections before the DRP and the Ld.DRP had rejected the objections filed by the assessee. Therefore, the AO had completed the final assessment as proposed vide the draft assessment order.

Page 5 of 8 IT(IT)A No. 377/Bang/2025 specifications or knowledge or providing training to the employees of the Indian company and therefore transactions could not be treated as fees for technical services or fees for included services liable to be taxed in India. The Ld.AR further submitted that the assessee company had not made available its services to the Indian company in accordance with the Article 12(4) of the Tax Treaty and therefore it could not be termed as FTS / FIS. The Ld.AR also filed a paper book enclosing the various documents including the notices, assessment orders, etc. The Ld.AR also submitted a case law compilation enclosing the Coordinate Bench order of this Tribunal as well as other Tribunals and the judgment of the Hon’ble Jurisdictional High Court reported in 346 ITR 467 and submitted that the fees paid by the Indian company to the assessee company could not be treated as fees for technical services and prayed to allow the appeal.

Page 6 of 8 IT(IT)A No. 377/Bang/2025 issue in respect of the assessee’s own case for the A.Ys. 2013-14, 2014-15, 2017-18 and 2019-20 came up for consideration before the Coordinate Bench of this Tribunal in IT(IT)A Nos. 88 to 90/Bang/2023 dated 01/06/2023 and also before the Hon’ble Delhi Tribunal in ITA No. 2324/Del/2022 dated 23/07/2024 wherein similar issue was decided by Coordinate Bench and the Tribunal in ITA Nos. 88 to 90/Bang/2023 had considered the issue at length and given the following finding: “21. In the instant case, the Indian customers/clients have to repeatedly seek the assessee’s services in respect of testing/research followed by a report on the outcome of such testing/research undertaken by the assessee. The assessee is not involved in supporting a system which is put in place or is already in place by the Indian customers/clients. The assessee is not getting its Indian customers/clients equipped to carry on the testing/research independently of the assessee. The utility of the services available in the form of a report, though highly technical in nature, comes to an end, little thereafter, if not immediately, after its rendition. The Support that the Indian entity seeks after the report is delivered is to understand the report from the assessee. The elements necessary for "make available" is absent in the services rendered by the assessee to its Indian customers/ clients, inasmuch as even for the said reports, the customers have to continuously refer to the assessee and the same is not freely made available to the Indian customers. Thus, technical services rendered by the affiliates do not "make available" technical knowledge, experience, skill, know-how or process while preparing these reports for their, Indian customers/ clients. In light of the aforementioned judicial decisions, we are of the considered view that the service recipient of the assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the assessee year after year. Accordingly, ground no. 1 raised by the assessee in all the three appeals stands allowed.” 9. Similarly, the Hon’ble Delhi Tribunal also concluded that the fees received by the assessee company would not be treated as fees for technical services and in coming to the said conclusion, the Hon’ble Delhi Tribunal had relied on the judgment of the Hon’ble Karnataka High Court reported in (2012) 346 ITR 467 in the case of CIT vs. De Beers India Minerals (P.) Ltd.

Page 7 of 8 IT(IT)A No. 377/Bang/2025 10. Even though the assessee had relied on several orders of the Tribunal, we are satisfied that the order of the assessee’s own case and the judgment of the Hon’ble Jurisdictional High Court cited supra would support the case of the assessee. When there is no transfer of any technical knowhow or knowledge by the assessee to the Indian companies, the payment of fees could not be treated as fees for technical services. The revenue had also not pointed out any contrary decision of the higher judicial forums to take a different view.

Order pronounced in the open court on 17th March, 2026.

Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member

Bangalore, Dated, the 17th March, 2026. /MS /

Page 8 of 8 IT(IT)A No. 377/Bang/2025 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore