2026 (2) TMI 419 - AT - Income Tax

Fees for Technical Services source versus receipt: remand for fresh assessment; assessee must prove exemption with cogent evidence

Dispute turns on whether fees for technical services are taxable in India by reference to source of income rather than mere receipt; if the contract was ... Income taxable in India or not - source of the income which is to be seen OR not the receipt of income - fees for technical services (FTS) under Section 9(1)(vii) - fees received by a UAE-resident assessee from an Indian resident - HELD THAT:- There is dispute between the rival parties in appreciation of facts itself. Merely because purchase order was issued by Comviva, India in favour of the assessee will not make the said income taxable in India. The source of the income is to be seen whether it is the Branch office in UAE of Comviva, India who got the contract from Etisalat, UAE and whether the said contract was executed by Branch office in UAE of Comviva, India, which is relevant i.e. the source of income being located outside India to fall in exception crafted u/s 9(1)(vii). The assessee on its part has not placed on record clinching and sufficient evidences to that effect to arrive at conclusive findings., although pleadings are there on record. Contentions raised by the assessee goes to the root of the matter and needs thorough examination by the authorities, as chargeability to tax will depend upon the findings based upon the proper appreciation of the evidences/explanations produced/provided or to be produced/provided by the assessee. The assessee is claiming exemption and hence primary onus is on the assessee to prove that it fulfils the conditions as are stipulated for claiming exemption, and the onus is on the assessee to bring on record cogent evidences. The judgment and order of Hon’ble Supreme Court in the case of Commissioner of Customes(Imports) v. Dileep Kumar & Co. [2018 (7) TMI 1826 - SUPREME COURT (LB)] is relevant. Thus, keeping in view the entire facts and circumstances of the case, it will be in the interest of justice and fair play to restore the matter back to the file of the AO for denovo reassessment after re-examination the entire matter afresh. The assessee is directed to produce necessary and cogent explanation/evidence in context thereto before the AO during the remand proceedings. The matter is, thus, remanded back to the file of the AO for denovo framing of the re-assessment. We order accordingly. Issues: (i) Whether the fees received by a UAE-resident assessee from an Indian resident are chargeable to tax in India as fees for technical services (FTS) under Section 9(1)(vii) of the Income-tax Act, 1961, having regard to the factual contention that the services were rendered to and consumed by the branch office of the Indian company in UAE and not in India.Analysis: The Tribunal examined the factual materials and rival contentions. The assessee admitted that the receipts were fees for technical services but contended services were rendered and utilised outside India by the branch office in UAE of the Indian payer, invoking the exception in Section 9(1)(vii). Revenue relied on purchase orders issued by the Indian head office and prior authorities holding that source/situs may be India. The Tribunal found that the authorities below had not adequately examined or verified the assessee's factual assertions and documentary material regarding whether the contract was awarded to and executed by the UAE branch and whether services were in fact consumed/utilised outside India. Because chargeability under Section 9(1)(vii) turns on the factual determination of where the services were utilised and where the source of income is located, the Tribunal held that the matter requires fresh, detailed factual inquiry by the Assessing Officer and that the assessee must be given opportunity to place cogent evidence on record.Conclusion: The matter is remitted to the file of the Assessing Officer for de novo framing of reassessment and factual verification of whether the FTS receipts accrued or arose in India; the assessee is directed to produce cogent evidence before the AO. The appeal is allowed for statistical purposes in favour of the assessee.