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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 filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-55, Mumbai [in short CIT(A)], Appeal No. CIT(A)-55/DCIT(IT)-1(2)(2)/IT-32/16-17 vide order dated 12.10.2017. The Assessment was framed by the Dy. Commissioner of Income Tax (International Taxation)-1(2)(2), Mumbai (in short ‘DCIT/ITO/ 2 AO’) for the A.Y.2013-14 vide order dated 20.05.2016 under section 143(3) read with section 144C(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first issue in this appeal of assessee is against the order of CIT(A) in taxing the receipts of ₹ 1,06,00,710/- being fee for technical services. For this assessee has raised the following three grounds: - “1. The Hon'ble Commissioner of Income Tax (Appeals) erred in taxing the receipt of Rs 1,06,00,712/- by the appellant as Fees for Technical Services.
The Hon’ble Commissioner of Income Tax (Appeals) failed to appreciate the appellant did not make available any technical knowledge / experience / skill and therefore was not taxable in Article 12 of India-US Treaty.
3. The Hon'ble Commissioner of Income Tax (Appeals) erred in not accepting the appellant's stand that the services rendered were not taxable in India since they did not fall within the definition of Fees for Technical Services either under the Income Tax Act 1961 or under the India-US Treaty.”
At the outset, the learned Counsel for the assessee argued that this issue is covered against the assessee and it is not interested in prosecuting the same as the order of CIT(A) is alright. As the learned 3 Counsel for the assessee has not contested this issue hence, the same is dismissed as not prosecuted.
The learned Counsel for the assessee stated that the second issue is as regards to the application of rate of tax at the rate of 15% or 10% on fee for technical services. According to the learned Counsel as per section 115A of the Act, the correct rate of tax is 10%. For this assessee has raised the following ground No. 4: -
4. Without prejudice to Grounds 1-3 above, the Hon'ble Commissioner of Income (Appeals) erred in applying the rate of tax at 15% of the fees for technical services instead of the correct rate of 10% specified in Section 115A of the Act.”
The learned Counsel for the assessee drew our attention to the order of CIT(A), wherein the AO in the original assessment levied the tax on fee for technical services at the rate of 40% but subsequently, passed rectification order under section 154 of the Act reducing the tax at 15% in view of India-US tax treaty. But CIT(A) has considered this issue and noted that the AO has already allowed the relief to the assessee under section 154 of the Act while rectifying the same and reducing the tax at 15% instead of 40% levied in the original assessment.
Now before us, the learned Counsel for the assessee filed the extract of provisions of section 115A subject to clause bb the rate of tax is 10% and the relevant provision reads as under: - “a non-resident (not being a company) or a foreign company, includes any income by way 4 of royalty or fees for technical services other than income referred to in sub-section (1) of section 44DA received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976, and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy, then, subject to the provisions of sub-sections (1A) and (2), the income-tax payable shall be the aggregate of,— ……………….
(BB) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of ten percent if such fees for technical services are received in pursuance of an agreement made on or after the 1st day of June, 2005 and.”
In view of the above the learned Counsel for the assessee stated that the tax on receipts, in the case of non-resident or a foreign company earning the income by way of royalty or fee for technical services, the tax is to be calculated at the rate of 10%. When this was pointed out to the learned Sr. Departmental Representative, he could not controvert the above position.