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Facts
Two appeals were filed by Philips entities challenging assessment orders that treated receipts from Information Technology, Design, and Support Services rendered to Indian group entities as taxable income under the India-Netherlands DTAA. The assessees contended these services did not 'make available' technical knowledge and thus should not be taxable, also disputing the levy of tax at a higher rate, interest, and initiation of penalty proceedings.
Held
The Tribunal upheld the findings of the Assessing Officer and DRP regarding the taxability of services for both appeals. However, for ITA No.543/Kol/2025 (Philips Electronics Nederland B.V.), it directed the AO to apply a flat tax rate of 10% for surcharge and cess as per Article 12 of the India-Netherlands DTAA.
Key Issues
Whether Information Technology, Design, and Support Services rendered by foreign entities to Indian group entities are taxable under Article 12(5) of the India-Netherlands DTAA; whether tax including surcharge and cess should be levied at a flat rate of 10% as per Article 12 of the DTAA; and challenges against the levy of interest under Section 234B and initiation of penalty proceedings under Sections 271A, 271B, and 270A.
Sections Cited
143(3), 144C(13), 234B, 271A, 271B, 270A
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
(निर्धारण वर्ा /Assessment Year : 2022-2023) M/s Philips International B.V. Vs ACIT(International Taxation), C/o Deloitte Haskins & Sells LLP Circle-2(1), Kolkata Bengal Intelligent Park, Building Omega, 13th & 14th Floor, Block- EP & GP, Sector-V, Salt Lake Electronic Complex, Kolkata PAN No. :AAFCP 4065 J (अपीलधर्थी /Appellant) (प्रत्यर्थी / Respondent) .. निर्धाररती की ओर से /Assessee by : Ms. Riya Shah, CA रधजस्व की ओर से /Revenue by : Shri Praveen Kishore, CIT-DR सुनवाई की तारीख / Date of Hearing : 05/08/2025 घोषणा की तारीख/Date of Pronouncement : 05/08/2025 आदेश / O R D E R Per George Mathan, JM: These two appeals are filed by the two different assessees arising out of the order passed by the ld.AO passed u/s.143(3) r.w.s.144C(13) of the Act, dated 22.01.2025 for the assessment year 2022-2023.
When the matter was called call upon for hearing, an adjournment application has been filed by Ms. Riya Shah, CA and appeared on the online mode was not in uniform. Consequently, as it is noticed that the 2 ITANo.543&544/Kol/2025 adjournment application does not give valid reasons for the adjournment and as the counsel was not in uniform, the appeal is being heard ex-parte.
Ld.CIT-DR was requested to make his submissions and he vehemently supported the order of the ld.DRP. 4. We have considered the submissions of the ld.CIT-DR and perused the orders of the authorities below. The grounds of appeal
raised in in the case of M/s Philips electronics Netherland B.V, reads as under :- PHILIPS ELECTRONICS NEDERLAND B.V. PAN: AAFCP4361F Assessment Year: 2022-2023 Appeal to the Income-tax Appellate Tribunal against Order dated
28. January 2025 passed u/s. 143(3) r.w.s. 144C(13) of the Income- tax Act, 1961 GROUNDS OF APPEAL
Based on the facts and circumstances of the case, Philips Electronics Nederland B.V. (here-in-after referred to as 'PENBV/Appellant') respectfully craves leave to prefer an appeal against the order dated 28 January 2025 passed by the Assistant Commissioner of Income- tax (International Taxation)-2(1), Kolkata ('Ld. AO') on the following grounds:
1. Taxability of Fees for Information Technology Services received from group entities is bad in law and on facts 1.1 That on the facts and in the circumstances of the case, the Learned Assessing Officer ['Ld. AO'] and the Hon'ble Dispute Resolution Panel ['Hon'ble DRP'] have erred in treating the sum of Rs. 90,98,85,471 received by the appellant from its group entities in India towards rendition of Information Technology Services as taxable without appreciating the fact that the same ought not to be taxable under Article 12(5) of the Double Taxation Avoidance Agreement between India and Netherlands ('India-Netherlands DTAA') as the appellant do not 'make available' technical knowledge, skills, experience, etc.
3 ITANo.543&544/Kol/2025 1.2 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing. and the Hon'ble DRP has further erred in confirming such taxation of, the receipt of Rs. 90,98,85,471 towards rendition of Information Technology Services as income of the appellant without appreciating the favorable order of Hon'ble Kolkata Tribunal in the appellant's own case (ITA No. 2241 of 2019 dated 15 September 2022 for AY 2015-16 and of 2021 dated 15 March 2023 for AY 2016-17) wherein services rendered under GSU agreement including information technology services was held as non-taxable in India. 1.3 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing. and the Hon'ble DRP has further erred in confirming such taxation of, the receipt of Rs. 90,98,85,471 towards rendition of Information Technology Services as income of the appellant without considering any of the supporting document/evidence submitted by the Appellant evidencing that the services rendered do not make available technical knowledge, experience, skill etc. to group companies.
2. Taxability of Fees for Design Services received from Philips India Limited is bad in law and on facts 2.1 That on the facts and in the circumstances of the case, the Learned Assessing Officer ['Ld. AO'] and the Hon'ble Dispute Resolution Panel ['Hon'ble DRP'] have erred in treating the sum of Rs. 3,51,94,430 received by the appellant from Philips India Limited towards rendition of Design Services as taxable without appreciating the fact that the same ought not to be taxable under Article 12(5) of the India-Netherlands DTAA as the appellant do not 'make available' technical knowledge, skills, experience, etc.
3. Without prejudice to above, levy of tax at higher rate on total income including levy of surcharge and cess instead of flat rate of 10% as per Article 12 to the India-Netherlands DTAA 3.1 That on the facts and in the circumstances of the case, the Ld. AO have erred in levying tax of Rs. 10,34,75,047 including surcharge and cess on the assessed income of Rs. 94,97,87,651, instead of levying a flat tax rate of 10% as per Article 12 to the India- Netherlands DTAA.
Erroneous levy of Interest under section 234B 4.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest under section 234B of the Act amounting to Rs. 22,58,178.
Erroneous levy of Additional Interest without assigning any provisions of the Act 4 ITANo.543&544/Kol/2025 5.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying additional interest amounting to Rs. 58,07,976 without assigning any provisions of the Act.
Erroneous adjustment of refund already issued 6.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in adding refund already issued amounting to Rs. 20,13,432 to the demand arising to the Company without considering the fact that no such refund was granted to the Company.
7. Initiation of penalty proceedings under sections 271A and 271B of the Act 7.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271A and 271B of the Act.
8. Initiation of penalty proceedings under sections 270A of the Act 8.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A. The Appellant desires leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of objections, at any time before or during the hearing of the Appeal. The Appellant submits that the above grounds are independent and without prejudice to one another. For Philips Electronics Nederland B.V. (Authorized Signatory) 5. The grounds of appeal
raised in M/s Philips International B.V, reads as under :- PHILIPS INTERNATIONAL B.V. PAN: AAFCP4065J Assessment Year: 2022-2023 Appeal to the Income-tax Appellate Tribunal against Order dated
22. January 2025 passed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 GROUNDS OF APPEAL
Based on the facts and circumstances of the case, Philips International B.V. (here-in-after referred to as 'PIBV/Appellant') respectfully craves leave to prefer an appeal against the order dated
22. January 2025 passed by the Assistant Commissioner of Income- 5 ITANo.543&544/Kol/2025 tax (International Taxation)-2(1), Kolkata ('Ld. AO') on the following grounds:
1. Taxability of Fees for Support Services received from group entities in India viz. Philips India Limited and Preethi Kitchen is bad in law and on facts 1.1 That on the facts and in the circumstances of the case, the Ld. AO and the Hon'ble Dispute Resolution Panel ['Hon'ble DRP'] have erred in treating the sum of Rs. 47,30,13,395 received by the appellant from its group entities in India towards rendition of Support Services as taxable without appreciating the fact that the same ought not to be taxable under Article 12(5) of the Double Taxation Avoidance Agreement between India and Netherlands ('India- Netherlands DTAA') as the appellant do not make available technical knowledge, skills, experience, etc. 1.2 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing. and the Hon'ble DRP has further erred in confirming such taxation of, the receipt of Rs. 47,30,13,395 towards rendition of Support Services as income of the appellant without considering any of the supporting document/evidence submitted by the Appellant evidencing that the services rendered do not make available technical knowledge, experience, skill etc. to group companies.
2. Erroneous levy of Additional Interest without assigning any provisions of the Act 2.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying additional interest amounting to Rs. 11,82,533 without assigning any provisions of the Act. [4:21 pm, 5/8/2025] Prakash Kumar Mishra:
3. Initiation of penalty proceedings under section 270A of the Act 3.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act without appreciating the fact that there is no under- reporting or misreporting of income. The Appellant desires leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of objections, at any time before or during the hearing of the Appeal. The Appellant submits that the above grounds are independent and without prejudice to one another. For Philips International B.V. (Authorized Signatory)
6 ITANo.543&544/Kol/2025 6. The assessee has not been able to dislodge any of the findings as arrived at by the ld.AO or the ld. DRP. Consequently, the findings of the ld. Assessing Officer and ld.DRP for both the appeals stand upheld.
However, in the case of M/s Philips Electronics Nederland B.V. in one of the ground being ground no.3 is in regard to levy of tax at higher rate on total income including levy of surcharge and cess instead of flat rate of 10% as per the Article 12 to the India-Netherlands DTAA. Considering that the assessment have been held against the assessee and the order of the Assessing Officer has been upheld, this ground of the assessee would survive and the Assessing Officer is directed to levy the surcharge and cess at the rate 10% as per Article 12 of the India- Netherlands DTAA.
In the result, appeal of the assessee in is partly allowed and