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Facts
The assessee, a German company, provided plant, equipment, drawings, and technical services to Indian clients. The dispute centers on the taxability of receipts from offshore supplies of drawings and designs, and equipment, and onshore supervision services in India.
Held
The Tribunal held that receipts from offshore supply of drawings and designs, inextricably linked to the sale of plant and equipment, are not taxable as Fees for Technical Services (FTS) but are business profits not taxable in India. However, receipts for onshore supervisory services where the activity exceeded six months were considered taxable as FTS, with the PE criteria not being a bar.
Key Issues
Whether offshore supply of drawings, designs, and equipment constitutes taxable FTS or business profits; taxability of onshore supervisory services; applicability of treaty provisions and PE rules.
Sections Cited
143(3), 144C(13), 144C(5), 9(1)(vii), 5(2), 7, 10, 234B, 234C, 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI VIMAL KUMAR
per audited books of account, no income is to be brought to tax thereon own qua this activity. Accordingly, Ground No. 5 raised by the assessee is allowed.
Ground No. 8 raised by the assessee is challenging the chargeability of interest u/s 234B and 234C of the Act. The chargeability of interest u/s 234B of the Act is consequential in nature. With regard to interest u/s 234C of the Act, the law is very well settled that same shall be charged only on the returned income and not on the assessed income.
In the result, the appeal of the assessee in for AY 2021-22 is Partly allowed. for AY 2022-23 (assessee’s appeal)
Ground Nos. 1, 2 and 8 raised by the assessee are general in nature and does not require any specific adjudication.
Ground No. 3, 4, 5 and 6 raised by the assessee for AY 2022-23, identical to Ground Nos. 3 to 6 and 8 raised by the assessee for assessment 2017-18. Hence, the decision rendered by us thereon for AY 2017-18 supra shall apply mutatis mutandis for AY 2022-23 also in view of identical facts, except with variance in figures.
Ground No. 7 raised by the assessee is challenging the chargeability of interest u/s 234B and 234C of the Act. The chargeability of interest u/s 234B of the Act is consequential in nature. With regard to interest u/s 234C of the Act, the law is very well settled that same shall be charged only on the returned income and not on the assessed income.
-1592/Del/2 MS Group Gmbh
In the result, the appeal of the assessee is partly allowed in for AY 2022-23.
To sum up, all the appeals of the assessee are partly allowed.
Order pronounced in the open court on 24/12/2025.