AAPC SINGAPORE PTE. LTD.,SINGAPORE vs. ASSISTANT COMMISSIONER OF INCOME TAX, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’, NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.2035/Del/2025 Assessment Year: 2022-23 AAPC Singapore Pte. Ltd., Vs The ACIT, International 1 Wallich Street, #17-01 Taxation, Circle-1(1)(1), , Guoco Tower, Delhi Singapore 078881 (Assessee) (Revenue) PAN No. AAICA4319D

Assessee by Sh. S.K Aggarwal, CA Revenue by Sh. M.S. Nethrapal, CIT(DR) Date of Hearing: 13.08.2025 Date of Pronouncement: 10.11.2025

ORDER Per Brajesh Kumar Singh, AM:- This appeal by the assessee is directed against the order of the Assistant Commissioner of Income Tax, Circle-1(1)(1) (in short ‘the AO’) dated 22.01.2025 passed u/s 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter ‘the Act’) in pursuance of directions of the ld. Dispute Resolution Panel (in short ‘ld. DRP')dated 30.12.2024 pertaining to Assessment Year 2022-23.

2 2035/Del/2025 AAPC Singapore Pte. Ltd., 2. The assessee has raised the following grounds of appeal

Ground No. 1: Addition proposed in respect of receipts for Loyalty Programme, Reservation Fee and Marketing Fee amounting to INR 24,57,25,903 1.1. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in making addition and the Ld. DRP erred in confirming addition to the income of the Appellant in relation to receipts for Loyalty Programme, Reservation Fee and Marketing Fee amounting to INR 24,57,25,903, ignoring the detailed factual and legal submissions furnished by the Appellant. 1.2. On the facts and in circumstances of the case and in law, the Ld. AO erred in treating and the Ld. DRP erred in confirming receipts on account of Loyalty Programme, Reservation Fee and Marketing Fee as Royalty/Fee for Technical Services (FTS') under the Act and under Article 12 of India-Singapore Double Taxation Avoidance Agreement ('DTAA'). 1.3. On the facts and in circumstances of the case and in law, the Ld. AO erred in concluding and the Ld. DRP erred in confirming that the receipts for Loyalty Programme, Reservation Fee and Marketing Fee are taxable in India without appreciating that such fees are received by the Appellant towards expenses incurred for marketing and reservation related activities, which are quite routine activities in the context of hotel industry. 1.4. On the facts and in circumstances of the case and in law, the Ld. AO and the Ld. DRP have erred in not following the favorable decisions in similar facts relied on by the Appellant wherein it has been held that centralized services rendered like sales and marketing, loyalty programs, reservation service, technological services etc. are not in the nature of Royalty/FTS under the Act as well as under the DTAA. 1.5. That on the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble DRP have erred in not following the binding decision of this Hon'ble ITAT in Appellant's own case for earlier years wherein the issue has been decided in favour of the Appellant on similar facts. 1.6. That on the facts and circumstances of the case and in law, the Ld. AO and Hon'ble DRP have grossly erred in failing to appreciate that the revenue's appeal for AY 2015-16, which involved similar facts, was dismissed by the Delhi High Court in light of the decision rendered in case of DIT Vs. Sheraton International Inc. (2009) 313 ITR 267 (Del).

3 2035/Del/2025 AAPC Singapore Pte. Ltd., General grounds 2. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in computing gross tax liability inclusive of surcharge and education cess, without taking into consideration the applicable tax rates as per India-Singapore DTAA in the computation sheet accompanying the final assessment order under section 143(3) of the Act. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest under section 234B and 234C of the Act in the computation sheet issued along with the final assessment order. 4. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating and the Ld. DRP erred in confirming penalty proceedings under section 270A of the Act. 5. The above grounds of appeal are independent and without prejudice to one another.

4 2035/Del/2025 AAPC Singapore Pte. Ltd., India. The core issue arising in the appeal relates to taxability of an amount of Rs.24,57,25,903/- as royalty income both under the provisions of the Act as well as under Indian-Singapore Double Taxation Avoidance Agreement (DTAA). The said amount was added by the Assessing Officer as Royalty at 10% under DTAA.

“3. During the year under consideration the Appellant had offered to tax income from franchise fees, license fees and technical fees (IT fee, Network access fee). 4. The Ld. AO issued the draft assessment order for AY 2022-23 on the same lines as the assessment order for AY 2015-16, AY 2020-21 and AY 2021-22 holding the receipts for Loyalty Programme, Reservation Fee and Marketing Fee as Royalty under the provisions of the Act as well as under India-Singapore DTAA. It may be stated that there were no assessment proceedings for the AYs 2016-17 to 2019-20. 5. The Ld. DRP in disposing of the objections followed their earlier directions on this issue and upheld the draft assessment order. The Ld. DRP vide Para 4.2 and 4.3 of its directions has held as under - 4.2 The issue raised in objection above is a legacy issue that has been under consideration for previous assessments as well. The Hon'ble ITAT has adjudicated the issue in favour of the assessee. For A Y 2015-16, Hon'ble Delhi High Court has adjudicated in August, 2024 in favour of the assessee. Considering the fact that Department may prefer further appeal against the decisions mentioned supra, the Panel re-iterates its findings, as given for A. Y. 2021-22 ...........” “4.3 Following the decision of the Panel for A.Y. 2020-21, the proposed addition of Rs.24,57,25,903/- is hereby upheld.”

5 2035/Del/2025 AAPC Singapore Pte. Ltd., The additions made in the assessment order for AY 2022-23 are 6. as under:- S. No. Nature of receipts Payer entity Amount (INR) 1 Loyalty Programme receipts AAPC India 3,82,39,312 2 Reservation Fee AAPC India 19,53,31,585 3 Marketing Fee Accor Advantage 1,21,55,006 India Total 24,57,25,903

6 2035/Del/2025 AAPC Singapore Pte. Ltd., decision rendered in the case of DIT vs Sheraton International Inc. (2009) 313 ITR 267 (Del) * The Correct date of the order is 02.07.2024

“5. Thus, it is seen that during the year, the AO made the following additions in the assessment order. Sl. Nature of receipts Payer entity Amount (INR) No. AY 2020-21 1 Loyalty Programme receipts AAPC India 13,14,42,789 2 Reservation Fee AAPC India 18,58,64,968 3 Marketing Fee Accor 1,38,62,424 Advantage India Total 33,11,70,181 5.1. In making the above addition, the AO followed the findings given in the case of the assessee for AY 2015-16 in the final assessment order dated 24.01.2023 passed u/s 147 r.w.s. 143(3) of the Act. The DRP also followed its directions dated 22.12.2022 for AY 2015-16 for giving its directions for AY 2020-21. This is evident

7 2035/Del/2025 AAPC Singapore Pte. Ltd., from the directions of the DRP, in para no.3.3 of its order for AY 2020-21, the relevant extract of which is reproduced as under:- "On these issues the DRP very recently vide its order dated 22.12.2022 for the assessment year 2015-16 has confirmed the stance taken by the AO to treat the above receipts as royalty chargeable to tax as per applicable tax rates..... ... Since, the legal and factual matrix remains same, the DRP doesn't see any reason to review the directions issues in the previous year. The objections on these issues by the assessee are rejected" 6. During the course of hearing, the ld. AR submitted that both the AO as well as the DRP have followed their respective findings/directions on these issues for AY 2015-16. The ld. AR further submitted that the co-ordinate Bench in the case of the assessee in ITA No.581/Del/2023, for AY 2015-16 vide an order dated 29.12.2023 has decided the appeal in favour of the assessee and deleted the additions on all the above three issues. It was also submitted that there has been no assessment in the case of the assessee for the assessment year 2016-17 to 2019- 20. 7. The ld. DR relied upon the orders of the authorities below. 8. We have heard both the parties and perused the material available on record. On perusal of the facts, it is seen that both the AO and the DRP have relied upon their findings/directions for the assessment year 2015-16 for this year also while making the additions amounting to Rs.33,11,70,181/- for AY 2020-21. On similar facts, the co-ordinate Bench in assessee’s own case in ITA No.581/Del/2023, vide order dated 29.12.2023 for AY 2015-16 held that the amount in dispute cannot be qualified as ‘royalty’ and directed the AO to delete the addition. Therefore, respectfully following the above decision of the Co-ordinate Bench, the addition of Rs.33,11,70,181/- is hereby deleted. Ground No.1 of the appeal is allowed. xxxxxxxxxxxxxxxxxx ITA No.3342/Del/2023 13. Ground no.2 raised in ITA No.3342/Del/2023 is similar to ground no.1 raised in ITA No.1868/Del/2023 decided by us in earlier part of this order. Therefore, our above decision would apply mutatis-mutandis to this ground of the appeal.

8 2035/Del/2025 AAPC Singapore Pte. Ltd., 6.1. Further the Revenue has filed an appeal against the order dated 29.12.2023 of the Tribunal, Delhi in the case of the assessee for AY 2015- 16 (ITA No.581/Del/2023), which was dismissed by the Hon’ble High Court vide order dated 05.08.2024 in ITA No.421/2024. The relevant extract of the order of the Hon’ble High Court is reproduced as under:-

“The Principal Commissioner calls in question the order of the Income Tax Appellate Tribunal ["Tribunal'] dated, 29 December 2023 and posits the following questions of law for our consideration: - "2.1 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in allowing the appeal of the assessee ignoring the fact that the assessee has artificially split the interdependent and interlacing activities under different heads to reduce the tax liability? 2.2 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in not considering the provision as per Clause (vi) of section 9(1) of the Act the service rendered by the assessee in connection with the sale or right to use any trademark also falls within the scope of Royalty? 2.3 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in not considering the principle of treating the receipts from activities ancillary or subsidiary to main activity of enjoyment or use of information as Royalty/FTS is recognized in the DTTA with Singapore under Article 12(4) (a)? 2.4 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in not considering the various payments in form of splitted agreement made to Assessee by India hotels are required to be treated as one for use of Brand or for use of commercial information in respect of Brand and accordingly taxable Royalty? 2.5 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in not considering the payment for use of such assets including brand name and the Industrial and commercial information would fall within the definition of Royalty under Article 12(3) of the DTAA which is utilized by the Assessee by Assessee company in building image of its hotels all over the

9 2035/Del/2025 AAPC Singapore Pte. Ltd., 2.6 Whether on the facts and circumstances of the case and in law, Ld. ITAT erred in not considering the provisions contained therein in Clause i) of the Explanation 2 of section 9 (I)(vi) make it very clear that any consideration received for use or right to use any trademarks is to be considered as Royalty?" 2. As we go though the judgment rendered by the Tribunal, we find that it has essentially rested its view on the decision rendered by this Court in Director of Income-Tax vs. Sheraton International Inc. [2009 SCC OnLine Del 4231]. 3. We note that while dealing with an identical controversy, we had in ITA 213/2024 relying upon the judgment of the Court in Sheraton International held as follows:- "3. Dealing with the question which stands posited, the Court in Sheraton International had held us under:- "32. In view of the aforesaid findings of the Tribunal that the main service rendered by the assessee to its client-hotels was advertisement, publicity and sales promotion keeping in mind their mutual interest and, in that context, the use of trademark, trade name or the stylized "S" or other enumerated services referred to in the agreement with the assessee were incidental to the said main service, it rightly concluded, in our view, that the payments received were neither in the nature of royalty under Section 9(1)(vi) read with Explanation 2 or in the nature of fee for technical services under Section 9(1)(vii) read with Explanation 2 or taxable under Article 12 of the DTAA. The payments received were thus, rightly held by the Tribunal, to be in the nature of business income. And since the assessee admittedly does not have a permanent establishment under the Article 7 of the DTAA business income" received by the assessee cannot be brought to tax in India. The findings of the Tribunal on this account cannot be faulted. The Tribunal pointedly observed that there was no evidence brought on record by the Revenue to enable them to hold that the agreement was a colourable device, in particular, that the payments received were for use of trade mark, brand name and stylized mark "S". We agree with reasoning adopted by the Tribunal. Moreover, these are findings of fact which could be gone into only if a question was proposed impugning the findings of the Tribunal as perverse. We find that no such question has been proposed in the appeal. The observations of the Supreme Court in the case of K. Ravindranathan Nair vs CIT [2001] 247 ITR 178 being relevant are extracted below (page 181):

10 2035/Del/2025 AAPC Singapore Pte. Ltd., "The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact-finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of fact reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it. The only jurisdiction of the High Court in a reference application is to answer the questions of law that are placed before it. It is only when a finding of the Tribunal on fact is challenged as being perverse, in the sense set out above, that a question of law can be said to arise." 33. In these circumstances we are of the view that no fault can be found with the impugned judgment. No question of law, much less a substantial question of law, has arisen for our consideration. In the result the appeals are dismissed." 4. Accordingly, and following the reasons assigned therein, we dismiss the present appeal." 4. Following the aforesaid, we find no merit in the instant appeal. No substantial question of law arises. 6.2. Therefore, in view of the above orders of the Co-ordinate Bench and respectfully following the aforesaid order of the Hon’ble Delhi High Court, we hold that the amount of Rs.24,57,25,903/- does not qualify as royalty as held by the Assessing Officer and the same is hereby deleted. Ground no.1 of the appeal is allowed.

“2. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in computing gross tax liability inclusive of surcharge and education cess, without taking into consideration the applicable tax rates as per India-Singapore DTAA

11 2035/Del/2025 AAPC Singapore Pte. Ltd., in the computation sheet accompanying the final assessment order under section 143(3) of the Act.” 7.1. In this regard, the Ld. AR has filed a written submission, which is reproduced as under:-

Ground No. 2: Computation of gross tax inclusive of surcharge and education cess, without taking into consideration the applicable tax rates as per India-Singapore DTAA. 30. It is respectfully submitted that in computing the gross tax liability amounting to INR 44,719,983 (S. No. 30) in the final computation sheet (Annexure 1), the Ld. AO has levied surcharge and education cess as well, instead of applying flat 10% as provided in Article 12 of India- Singapore DTAA. A comparative of tax computation is provided below for your ready reference: Particulars Computation of tax liability: As per As per Appellant assessment order Returned Income 18,44,99,920 18,44,99,920 Additions made vide 24,57,25,903 24,57,25,903 assessment order on account of Royalty Total Assessed Income (A) 43,02,25,823 43,02,25,823 Tax @ 10% as per Article 12 4,30,22,583 4,30,22,5832 of India-Singapore DTAA(B) Surcharge © 9,22,500 ----- Health and Education cess 7,74,900 ----- @ 4%(D) Gross Tax Liability (E) 4,47,19,983 4,30,22,583 =(B)+(C)+(D) Effective tax rate (E)/(A) 10.4% 10%

12 2035/Del/2025 AAPC Singapore Pte. Ltd., defined in Article 2(1) to include 'income tax' and is stated to include 'surcharge' thereon, so far as India is concerned. Thus, as Article 2(1), explicitly states that the tax rates laid down in the DAA are inclusive of surcharge, the Ld. AO cannot add surcharge while computing tax liability. 32. Article 2(2) further extends the scope of the 'tax by laying down that it shall also cover "any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1". Thus, education cess is essentially of the same nature as surcharge, being an additional surcharge, the scope of article 2 also extends to the education cess. 33. Accordingly, the provisions of Article 12 must find precedence over the provisions of the Income Tax Act and restrict the taxability, whether in respect of income tax or surcharge or additional surcharge - whatever name called, at the rates specified in the respective article. 34. In regard to the above, reliance has been placed on the following judicial precedents, wherein it has been held that surcharge and education cess cannot be levied separately over and above the rates prescribed in tax treaties as the treaty tax rates are inclusive of surcharge and education cess: * M/s JCDecaus S.A. vs ACIT/DCIT (ITA No. 1630/Del/2015/ ITA No. 1552/Del/2016) Delhi Tribunal * Sunil V. Motiani vs ITO (ITA No.276/Mum/2012), Mumbai Tribunal; * ITO vs M/s M Far Hotels Ltd (I.T.A No. 430 to 435/Coch/2011), Cochin Tribunal; * Deputy Director of Income Tax vs. JP Morgan Securities Asia (P.) Ltd (ITA No. 4622/Mum/2012), Mumbai Tribunal; * Deputy Director of Income-tax v. BOC Group Ltd., (64 taxmann.com 386), Kolkata Tribunal. 35. Hence, it is submitted that the tax rate of 10.4% (approx.) used by the Ld. AO for computation of tax liability is a mistake apparent from records and must be rectified. We request your Honors to direct the Ld. AO to compute the tax liability as per the rate provided in Article 12 of India-Singapore DTAA, i.e., 10%.”

13 2035/Del/2025 AAPC Singapore Pte. Ltd., 7.2. The ld. CIT-DR relied upon the orders of the authorities below.

7.3. We have heard both the parties and perused the material available on record. On similar issue regarding the computing the tax liability as per the rate provided in Article 12 of India-Singapore DTAA, i.e., 10% as contended by the assessee in this case as against the levy of tax @ 10% alongwith surcharge and health & education cess as charged by the AO, the coordinate bench of the Tribunal in the case of M/s JCDecaus S.A. vs ACIT/DCIT (supra) relied by the assessee held that where the taxation is governed by the DTAA signed by India alongwith the contracting state wherein the tax rate is provided then the taxation has to be effected as per the tax rate provided therein and no further surcharge or education cess can be levied. The relevant extract of the said decision relied by the assessee is reproduced under :

“8 In ground No. 5 in both the appeals the assessee has raised the issue that education cess and secondary and higher education cess is not applicable while taxing the income on gross basis under the India France DTAA.

8.1 Before us, the learned Counsel of the assessee relied on the decision of the Tribunal, Kolkatta bench in the case of DCIT Vs BOC Group Ltd reported in (2015) 64 taxmann.com 386 (kolkatta-Trib) and submitted that tax rate prescribed in the DTAA shall have to be followed strictly without any additional taxes thereon in the form of surcharge or education cess.

14 2035/Del/2025 AAPC Singapore Pte. Ltd., 8.2 The learned DR, on the other hand, supported the action of the lower authorities, but could not produced any decision of the Tribunal or the court wherein such cess or surcharge on the Income-tax under the DTAA has been upheld.

8.3 We have heard the rival submission of the parties on the issue in dispute. We find that the Tribunal in the case of BOC Group Ltd. (supra) has considered various decisions on the issue in dispute and then adjudicated the issue as under:

“6. We have heard the rival submissions and perused the materials available on record and the various case laws relied upon by the counsels of both the sides. We find that the assessee herein is governed by India UK Treaty wherein the relevant clauses are reproduced hereunder for the sake of convenience:-

ARTICLE 2 Taxes covered-1. The taxes which are the subject of this Convention are (a) in the United Kingdom: (i) the income-tax; (ii) The corporation tax; (iii) The capital gains tax; and (iv) The petroleum revenue tax; (hereinafter referred to as "United Kingdom tax"); (b) In India The income-tax including any surcharge thereon; (hereinafter referred to as "Indian tax")

15 2035/Del/2025 AAPC Singapore Pte. Ltd., authorities of the Contracting States shall notify each other of any substantial changes which made in their respective taxation laws.

ARTICLE 3- General definitions

(a) The term United Kingdom means Great Britain and Northern Ireland;

(b) The term India means the Republic of India;

(c) The term tax means United Kingdom tax or Indian tax, as the context requires,, but shall not include any amount which is payable in respect of any default or omission in relation to the ITA No. 571/Kol/2013-C- AM The BOC Group Ltd 4 taxes to which this Convention applies or which represents a penalty imposed relating to those taxes;

ARTICLE 13- Royalties and fees for technical services -1. Royalties and fees for technical services arising in a Controlling State and paid to a resident of the other Contracting State may be taxed in that other State.

(a) In the case of royalties within paragraph 3(a) of this Articles, and fees for technical services within paragraphs 4(a) and ( c) of this Article,

16 2035/Del/2025 AAPC Singapore Pte. Ltd., (i) During the first five years for which this Convention has effect; (aa) 15 per cent of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Government of the first mentioned Contracting State or a political sub-division of that State, and (bb) 20 per cent of the gross amount of such royalties or fees for technical services in all other cases; and

(ii) During subsequent years, 15 per cent of the gross amount of such royalties or fees for technical services; and

(b) In the case of royalties within paragraph 3(b) of this Article and fees for technical services defined in paragraph 4(b) of this Article, 10 per cent of the gross amount of such royalties and fees for technical services."

The expression 'tax' is defined in Article 2(1) to include 'income tax'and is stated to include 'sur charge' thereon, so far as India is concerned. Article 2(2) further extends the scope of the 'tax' by laying down that it shall also cover "any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1".

(11) The amount of income-tax as specified in sub-sections (4) to (10) and as increased by a surcharge for purposes of the Union Calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on

17 2035/Del/2025 AAPC Singapore Pte. Ltd., income-tax", so as to fulfill the commitment of the Government to provide ITA No. 571/Kol/2013-CAM The BOC Group Ltd 5 and finance universalized quality basic education, calculated at the rate of two per cent of such income- tax and surcharge [Emphasis supplied]

6.1. We find that the Article 2 of the India UK Treaty provides that income tax including any surcharge thereon and it further provides that this convention shall also apply to any identical or substantially similar taxes

18 2035/Del/2025 AAPC Singapore Pte. Ltd., which are imposed by either contracting state after the date of signature of this convention in addition to or in place of the taxes of the contracting state referred to in paragraph 1 of this article. Hence by this , it can safely be concluded that the levy of education cess though introduced from Finance Act, 2004 which is much after the date of signing of this convention would also be made applicable while determining the tax rates under the convention. It is well settled that the education cess is nothing but an additional surcharge. When the Article 2 states that surcharge is included in income tax and the tax rate of 15% for fee for technical services is prescribed in Article 13 shall have to be deemed to include surcharge and since cess is nothing but an additional surcharge, the tax prescribed under DTAA @ 15% in the instant case shall be deemed to included surcharge and education cess. Hence we hold that when the tax rate is determined under DTAA, then the tax rate prescribed thereon shall have to be followed strictly without any ITA No. 571/Kol/2013-C-AM The BOC Group Ltd 6 additional taxes thereon in the form of surcharge or education cess. Reliance in this regard is also placed on the following decisions in support of our contentions:-

a) DIC Asia Pacific Pte Ltd vs Asst Director of Income Tax, International Taxation in ITA No. 1458 (kol) of 2011 dated 20.6.2012 for Asst Year 2009- 10 reported in (2012) 52 SOT 447 (Kol ITAT) This was a case of treaty between India and Singapore. Issue involved was taxability of interest and royalty income under the relevant article of the treaty and the levy of surcharge and education cess to the tax prescribed under DTAA in the relevant article. It was held that :-

19 2035/Del/2025 AAPC Singapore Pte. Ltd., "A plain reading of Article 2, 11 and 12 of the treaty show that while interest and royalties can indeed be taxed in the source state, the tax so charged on the same, under Articles 11 and 12, cannot exceed 15% and 10% respectively. The expression 'tax' is defined in Article 2(1) to include 'income tax' and is stated to include 'surcharge' thereon, so far as India is concerned. Article 2(2) further extends the scope of the 'tax' by laying down that it shall also cover "any identical or substantially similar taxes which are imposed by either contracting state after the date of signature of the present agreement in addition to, or in place of, the taxes referred to in paragraph 1".

It is clear that the education cess, as introduced in India initially in 2004, was nothing but in the nature of an additional surcharge. It was described as such in the Finance Act 2004 introducing the said cess.

We have also noted Article 2(1) of the applicable tax treaty provides that the taxes covered shall include tax and surcharge thereon. Once we come to the conclusion that education cess is nothing but an additional surcharge, it is only corollary thereto that the education cess will also be covered by the scope of Article 2. Accordingly, the provisions of Article 11 and 12 must find precedence over the provisions of the Income Tax Act and restrict the taxability, whether in respect of income tax or surcharge or additional surcharge - whatever name called, at the rates specified in the respective article. In any case, education cess was introduced by the Finance Act 2004, with effect from assessment year 2005-06 which was much after the signing of India Singapore traty on 24th January 1994. In view of the specific provisions to the effect that the scope of Article 2 shall ITA No.

20 2035/Del/2025 AAPC Singapore Pte. Ltd., 571/Kol/2013-C-AM The BOC Group Ltd 7 also cover "any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of , the taxes referred to in paragraph 1", and in view of the fact that education cess is essentially of the same nature as surcharge, being an additional surcharge, the scope of article 2 also extends to the education cess. For the reasons set out above, we are of the considered view that the education cess cannot indeed be levied in respect of tax liability of the appellant company. The assessee, therefore, deserves to succeed on this issue.

b) Sunil V. Motiani vs ITO (International Taxation) reported in (2013) 33 taxmann.com 252 (Mumbai Trib) This judgement was rendered by the Mumbai Tribunal in the context of India UAE Treaty after considering the decision of the Uttarakhand High Court in the case of CIT vs Arthusa Offshore Co reported in 216 CTR 86 which dealt with India US Treaty. It was held that :-

"5. We have heard both the parties and their contentions have carefully been considered. We found that the issue raised by the assessee is covered in favour of the assessee by the aforementioned decisions of Tribunal in the case of Sunil V. Motiani (supra)."

c) Parke Davis and Company LLC vs ACIT reported in (2014) 41 taxmann.com 193 (Mumbai Trib) This judgement was rendered in the context of India USA treaty after considering the decision of the Uttarakhand High

21 2035/Del/2025 AAPC Singapore Pte. Ltd., Court in the case of CIT vs Arthusa Offshore Co reported in 216 CTR 86 which dealt with India US Treaty. It was held that :-

"2. At the outset it was submitted by Ld. AR that the only issue raised by the assess in the present appeal is that the education cess and secondary and higher secondary education cess of Rs.50,104/- is not liable to be payable when tax is determined as per India US Tax Treaty . It was submitted that this issue is covered in favour of assessee by the decision of ITAT in the case of Sunil V. Motiani v. ITO [2013 33 taxmann.com 252/59 SOT 37 (Mumbai-Trib). He has placed a copy of the said order on our ITA No. 571/Kol/2013-C-AM The BOC Group Ltd 8 record and a copy was also given to Ld. DR. He drew our attention towards the observation of the Tribunal in para-5."

22 2035/Del/2025 AAPC Singapore Pte. Ltd., d) ITO (Intl Taxn) vs M/s M Far Hotels Ltd in ITA Nos. 430 to 435 / Coch / 2011 dated 5.4.2013 (Cochin Tribunal) This judgement was rendered in the context of India France treaty. Issue involved was taxability of management fees and interest income under the relevant article of the treaty and the levy of surcharge and education cess to the tax prescribed under DTAA in the relevant article. It was held that :-

"If the provisions of DTAA are more beneficial to the taxpayer, then the provisions of DTAA would prevail over the Indian Income Tax Act. Since the DTAA is silent about the surcharge and education cess for the purpose of deduction of tax at source, this tribunal is of the considered opinion that the taxpayer may take advantage of that provision in the DTAA for deduction of tax. The CITA has only deleted the tax component to the extent of surcharge and education cess at the rate applicable under the DTAA. Therefore, this tribunal do not find any infirmity in the orders of lower authority. Accordingly, the same are confirmed. "

Respectfully following the aforesaid judicial precedents, we hold that the surcharge and education cess is not leviable when the tax rate is prescribed under DTAA. Hence ITA No. 571/Kol/2013-C-AM The BOC Group Ltd 9 we do not find any infirmity in the order of the Learned CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed.” (Emphasis supplied externally)

8.4 We find that in the instant case in India France DTAA also the Income-tax include any surcharge thereon and tax rates have been prescribed on the FTS as under:

23 2035/Del/2025 AAPC Singapore Pte. Ltd., “[2. However, such royalties, fees and payments may also be taxed in the Contracting State, in which they arise and accordingy to the laws of that contracting state, but if the recipient is the beneficial owner of these categories of income, the tax so charged shall not exceed 10 per cent of the gross amount of such royalties, fees and payments]”

8.5 In view of the provisions of the India France treaty on the issue being similarly worded with the provisions of the India UK DTAA, following the finding of the Tribunal in the case of BOC group Ltd.(supra), we direct the Assessing Officer to delete the education cess and secondary and higher education cess levied on the Income-tax on the gross basis under the India France DTAA. The ground No. 5 in both assessment year is thus allowed.

7.4 In this regard the relevant extract of the India-Singapore DTAA laying down the rate of taxation is reproduced under :

ARTICLE 12

ROYALTIES AND FEES FOR TECHNICAL SERVICES

[2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the

24 2035/Del/2025 AAPC Singapore Pte. Ltd., royalties or fees for technical services, the tax so charged shall not exceed 10 per cent.]

7.5 In view of the provisions of the India Singapore treaty on the issue being similarly worded with the provisions of the India France DTAA following the finding of the Tribunal in the above case we direct the Assessing Officer to delete the surcharge and secondary and health and education cess levied on the Income-tax on the gross basis under the India Singapore DTAA. The ground No. 2 of the appeal is allowed.

Order Pronounced in the Open Court on 10th November, 2025

Sd/- Sd/- [VIKAS AWASTHY] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/11/2025 Shekhar Copy forwarded to: 1. Appellant 2. Respondent

25 2035/Del/2025 AAPC Singapore Pte. Ltd., 3. PCIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, DELHI