SANDVIK IT SERVICES AB (FORMERLY KNOWN AS AB SANDVIK INFORMATION SYSTEMS),PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX (INTERNAL TAXATION), CIR-2, PUNE

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ITA 536/PUN/2021Status: DisposedITAT Pune15 September 2022AY 2018-195 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the services rendered were similar to those in preceding years. Following its own precedent, the Tribunal directed the exclusion of service charges from one AE and remitted the matter for examination of services from other AEs.

What were the facts?

The assessee, a non-resident Swedish company, provided IT support services to its Indian associated enterprises. The assessee claimed these service charges were not taxable in India under the India-Sweden DTAA. The AO included these amounts in the total income, which was upheld by the DRP.

What were the issues?

The primary issue was the taxability of IT support service charges received by a non-resident from its Indian AEs under the DTAA. The secondary issue involved the extent of examination required for services rendered by the assessee.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH, ‘C’ PUNE

Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI

For Appellant: Shri Nikhil Pathak
For Respondent: Shri Shishir Srivastava

आदेश / ORDER

PER R.S. SYAL, VP : This appeal by the assessee is directed against the final assessment order dated 26-08-2021 passed by the Assessing Officer (AO) u/s.143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2018-19. 2. Briefly stated, the facts of the case are that the assessee is a non-resident company incorporated in Sweden. It filed a return declaring total income of Rs.58,54,640/- claiming refund of Rs.3.37 crore. The assessee rendered IT Support services to its four Indian Associated Enterprises (AEs), namely, Sandvik Asia Pvt. Ltd. for a sum of Rs.29,87,15,624/-; Walter Tools India Pvt. Ltd. for a sum of Rs.1,73,15,155/-; Dormer Tools India Pvt. Ltd. for a sum of Rs.36,68,288/-; and Seco Tools India Pvt. Ltd. for a sum of Rs.44,56,064/-. The assessee claimed that sum total of these service charges received totaling to Rs.32.41 crore was not chargeable to tax in view of Article 12 of the Double Taxation Avoidance (DTAA) Agreement between India and Sweden read with Protocol thereto. The Assessing Officer (AO) included such amount in the total income in the draft order. The assessee remained unsuccessful before the Dispute Resolution Panel (DRP), which led the AO to make the above addition in the final assessment order. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

3.

We have heard the rival submissions and perused the relevant material on record. At the outset, it is pertinent to record that both the sides fairly admitted that the services rendered by the assessee to the four Indian entities were similar to those provided by it in the earlier years. It was also not disputed that the agreements under which the services were provided also continue to remain the same as were prevalent in the preceding years. The sum and substance of the above submissions is that the assessee rendered services to its four Indian entities in the same manner and under the same agreements as was the position for the immediately preceding assessment year and earlier years. The AO made similar addition in the earlier years as well. The question of taxability of the IT Support service charges received by the assessee from its four associated enterprises came up for consideration before the Tribunal in earlier years also. The latest order for the immediately preceding assessment year 2017-18 has been placed in the paper book. The Tribunal held that the receipt from Sandvik Asia Pvt. Ltd. was not chargeable to tax. As regards the receipt from other three AEs, the Tribunal remitted the matter to the file of AO for examining the precise nature of services before taking a final decision. In view of both the sides agreeing that the facts and circumstances are similar, respectfully following the precedent, we overturn the impugned order insofar as the taxability of Rs.29,87,15,624/- from Sandvik Asia Pvt. Ltd. is concerned. This amount is directed to be excluded from the total income of the assessee. As regards the IT Support Service charges received by the assessee from other three entities, following the precedent, we set-aside the impugned order and remit the matter to the file of the AO for deciding it afresh in conformity with the observations made by the Tribunal in its order for the immediately preceding assessment year.

4.

In the result, the appeal is partly allowed. Order pronounced in the Open Court on 15th September, 2022.

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