2023 (10) TMI 458 - AT - Income Tax

Tribunal allows appeals due to genuine cause; fees not taxable under India-Portugal DTAA. Most Favoured Nation clause benefits.

Aluminium Pechiney, C/o- CA, Praveen Gambhir Versus DCIT, Circle-1 (1) (1), International Taxation, New Delhi

Aluminium Pechiney, C/o- CA, Praveen Gambhir Versus DCIT, Circle-1 (1) (1), International Taxation, New Delhi - TMI Issues Involved:1. Condonation of Delay in Filing Appeals2. Taxability of Engineering Package Fee and On-Site Man-Day Charges as Fees for Technical Services (FTS)3. Application of Most Favoured Nation (MFN) Clause under India-Portugal DTAA4. Treatment of Receipts under Technical Collaboration Agreement (TCA)Condonation of Delay in Filing Appeals:Appeals in ITA Nos. 9483/Del/2019 and 9484/Del/2019 were delayed by 45 days. After considering the submissions of the parties and perusing the materials on record, the Tribunal condoned the delay, satisfied that it was due to a genuine cause, and admitted the appeals for adjudication on merits.Taxability of Engineering Package Fee and On-Site Man-Day Charges as Fees for Technical Services (FTS):The assessee, a non-resident corporate entity, claimed that the income declared as Royalty/FTS under Article 13 of India - France DTAA was not taxable in India. The Tribunal examined whether the engineering package fee of Rs. 15,94,34,150/- and on-site man-day charges of Rs. 1,39,90,735/- could be treated as FTS under the treaty provisions. The Tribunal concluded that the services rendered were in connection with the installation/erection of plant and machinery involved in mining of natural resources, thus falling within the exceptions provided under Article 12(5)(f) and 12(5)(g) of India - Portugal DTAA, and hence, not taxable at the hands of the assessee.Application of Most Favoured Nation (MFN) Clause under India-Portugal DTAA:The assessee claimed the benefit of the MFN clause in paragraph 7 of the Protocol to India - France DTAA, referring to the definition of FTS under Article 12(4) of India - Portugal DTAA. The Tribunal accepted the assessee's claim, noting that the services provided did not make available any technical knowledge, skill, etc., to the service recipient, and thus, the receipts did not qualify as FTS under Article 12(4)(b) of India - Portugal DTAA.Treatment of Receipts under Technical Collaboration Agreement (TCA):For the assessment year 2011-12, the Tribunal noted that the Technical Collaboration Agreement (TCA) had expired on 19.01.2010. Therefore, the receipts could not fall under Article 12(4)(a) of India - Portugal DTAA. The Tribunal directed the Assessing Officer to delete the additions, concluding that the facts and issues involved were identical to the previous appeal and the assessee's case stood on a better footing as the TCA was not in force in the impugned assessment year.Conclusion:ITA Nos. 9483/Del/2019 and 9484/Del/2019 were allowed, and ITA No. 3410/Del/2016 was dismissed.Order pronounced in the open court on 6th September, 2023.