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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal is arising out of the order of Dispute Resolution Panel- 2, Mumbai [in short ‘DRP’], in objection No. 027 vide direction dated 22.08.2017. The Assessment was framed by the Dy. Commissioner of Income Tax (Int. Tax)-Circle 4(1)(2), Mumbai (in short ‘DCIT/AO’) for the 2 assessment year 2014-15 vide order dated 22.09.2017 under section 144C (13) read with section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of DRP/ AO is whether the Indian subsidiary can be considered as Dependent Agent Permanent Establishment (PE) of the assessee and subsequently taxability of running of IT services and AMC services if the assessee does not have PE in India. Further another issue of short granting of credit of tax deducted at source. For this assessee has raised the following grounds: - “1. Ground No. I - Indian subsidiary considered as Dependent Agent Permanent Establishment (PE) of the Appellant 1.1. On the facts and in circumstances of the case and in law, the learned DCIT has disregarded the fact that during the year under consideration, UI Team Telecom Software Pvt. ltd (hereinafter referred to as UI India) had no operations and hence TTI India cannot be considered as an agent of the Appellant.
1.2 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned DCII has erred in holding that TTI India is a Dependent Agent PE of the Appellant in India and assessed an amount of INR 4,44,47,190 as Business Income without appreciating the fact that the conditions 3 mentioned in Article 5(5) of India - Israel DTAA are not fulfilled.
1.3 On the facts and in the circumstances of the case and in law, the learned DCII erred in not considering the favorable order of the jurisdictional Mumbai Tribunal in Appellant's own case for AY 2008-09, AY 2009-10 and AY 2010-11 wherein it was held that UI India cannot be considered as Dependent Agent PE of the Appellant in India.
2. Ground No. II - Taxability for rendering IT services and AMC services if Appellant does not have PE in India 2.1 On the facts and in the circumstances of the case and in law, the Learned DCIT has erred in holding amount received from rendering of IT Support and routine AMC services are technical in nature.
2.2 Without prejudice to the above, the Appellant contends that even where the amounts received for rendering IT and routine AMC services are treated as Fees for Technical Services (F15), the same cannot be treated as FIS within the meaning of Article 12 of India - Portuguese Republic DTAA read with clause 2 of protocol dated 29.01.1966 of India - Israel DIM, since such services neither make available 4 technical knowledge, experience, skill, etc. nor it consist of development and transfer of a technical plan or a technical design.
2.3 On the facts and in the circumstances of the case and in law, the learned DCII erred in not considering the favorable orders of the jurisdictional Mumbai Tribunal in Appellant's own case for AY 2006-07, AY 200708, AY 200809 & AY 2009-10 & AY 2010-11 wherein similar services rendered by the Appellant to group company were considered to not make available technical knowledge, skills etc. as per the provisions of India-Israel DIM read with clause 2 of protocol dated 29.01.1966 of India - Israel DTAA.
2.4 Without prejudice to the above, the learned DCIT has disregarded the fact that no software was supplied to Indus Tower Limited (ITI) and Reliance Tech Service Private Limited (RTSPL) during the year under consideration and hence services rendered to ITL and RCL cannot be ancillary and subsidiary to the application or enjoyment of the software supplied and therefore not taxable as FTS as per Article 12(4)(a) of India - Canada DTAA.
3. Ground no. Ill - Short granting credit of tax deducted at source 5 On the facts and in the circumstances of the case, the learned DCII has erred in not granting the credit for the taxes amounting to INR 42,068.”
The assessee Teoco Limited is a company incorporated in Israel and engaged in supply of software and rendering of AMC and IT software services. During the previous year 2013-14 relevant to this AY 2014-15, the assessee has provided IT support and annual maintenance AMC to Indus Tower Limited (ITL) and Reliance Tech Service Private Limited (RTSPL). During the relevant financial year, the assessee company is raised the invoices amounting to ₹ 6,60,56,973/- on ITL for providing IT support and AMC services. However, out of the same, the assessee has received payment ₹ 3,49,15,561/-. Further, the assessee company has also raised invoices amounting to ₹ 2,28,37,406/- on RTSPL for providing IT support and AMC services but no payment has been received by the assessee company during the year under consideration. The DRP relying on the earlier year assessment order i.e. AY 2013-14 adjudicated the issues and held that the assessee has permanent establishment by observing in Para 6.2.10 and 6.2.11 as under: - “6.2.10 It has been ascertained that the above issue is being contested by the Department and it has filed an appeal before the Hon’ble High Court for aforesaid assessment years. Hence, department having decided to go into further appeal against the said order of the Hon’ble ITAT, we do not find any infirmity in the draft order of the AO/ TPO in keeping the issue alive. We have also taken note of the decision of the 6 Hon’ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax (2000) 159 CTR 0001 : (2000) 243 ITR 0083, wherein it is observed that ‘The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue.”
6.2.11 In view of the above, we find that the approach of the TPO/ AO is acceptable and no direction is required to be given in respect of the same. The ground of objection is rejected accordingly.”
Similarly, on merits also, he made addition on account of rendering IT services and AMC services to both the parties.”
At the outset, the learned Counsel for the assessee stated that the issues are covered by the Tribunal decision in assessee’s own case in & 5766/Mum/2012 & 2099/Mum/2014 for AY 2008-09 to 2010-11 vide order dated 30.11.2016, ITA No. 103/Mum/2017 for AY 2011-12 vide order dated 15.10.2018, in ITA No. 1312/Mum/2016 for AY 2012-13 vide order dated 27.06.2018, in ITA No. 1910/Mum/2017 for AY 2013-14 vide order dated 13.11.2018, in ITA No. 9008/Mum/2010 for AY 2007-08 vide order dated 11.09.2015. Finally, the Tribunal in AY 2013-14 in ITA No. 1910/Mum/2017 vide order dated 13.11.2018 relying on the earlier years orders noted that the amount received by assessee is not in the nature of royalty as per article 12 of India Isreal DTAA and is not taxable in India. The same is to be treated as business income of the 7 assessee. The Tribunal has also held that there is no dependent agency permanent establishment in India. For this, the Tribunal observed in Para 6 to 8 as under: - “6. We had carefully gone through the orders of the lower authorities as well as order passed by the Tribunal in assessee’s own case as stated above and found that facts and circumstances brought to our notice by learned AR are parimateria as discussed by the Tribunal in assessee’s own case, we hold that amount received by the assessee are not in the nature of royalty as per Article 12 of India-Isreal DTAA is not taxable as such in India, but has to be treated as business profit of the assessee.
Next grievance of assessee relates to treating the DTAA India as an independent agent PE of assessee. We found that this issue is also covered by the order of the Tribunal as under: - “5.3. We have gone through the orders passed by the lower authorities. It is noted by us that it is sixth year of the transactions; which have always been accepted by the Revenue in all the earlier years. It is further noted that the Tribunal in assessee's own case in A.Y. 2006-07 clearly held that assessee had no permanent establishment in India. It is 8 further noted that TTI India has entered into the agreement on independent basis. No facts have been discussed by the Ld. CIT(A) to show that how the judgment of Rolls Royce PLC was applicable in the preference of the decisions of the Tribunal rendered in assessee's own case. Under these circumstances, we do not find any reason to deviate from the order of the Tribunal of the earlier years. Thus, respectfully following the order of the Tribunal for A.Y. 2006- 07, we decide this issue in favour of the assessee. Thus, ground no.2 is allowed.
Consistent with the aforesaid view of the Co- ordinate Bench in assessee's own case, we hold that TTI India cannot be treated as assessee's dependent agent PE in India, hence, the amount so received is not taxable at the hands of the assessee. The grounds are allowed.”