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The Income Tax Appellate Tribunal (ITAT) held that the receipts received by the assessee, a foreign associated enterprise (AE), from HCLT for providing software, engineering, and infrastructure services were not taxable in India. The Assessing Officer (AO) had contended that the nature of these receipts should be considered "fees for technical services (FTS)" under Explanation 2 to Section 9(1)(vii) of the Income Tax Act and taxable under the Act and the India-Singapore DTAA. However, the ITAT agreed with the assessee's contention that HCLT was required to treat the entire sale proceeds received from foreign clients as export turnover under Explanation 2 to Section 10AA by raising a single consolidated invoice. The ITAT distinguished the facts from other cases cited by the Revenue and held that the assessee rendered services to foreign customers outside India, and the services were utilized in their businesses outside India, making the receipts non-taxable. The issue of taxability under DTAAs was left open for determination. The appeal was decided in favor of the assessee.
The Income Tax Appellate Tribunal (ITAT) held that the receipts received by the assessee, a foreign associated enterprise (AE), from HCLT for providing software, engineering, and infrastructure services were not taxable in India. The Assessing Officer (AO) had contended that the nature of these receipts should be considered "fees for technical services (FTS)" under Explanation 2 to Section 9(1)(vii) of the Income Tax Act and taxable under the Act and the India-Singapore DTAA. However, the ITAT agreed with the assessee's contention that HCLT was required to treat the entire sale proceeds received from foreign clients as export turnover under Explanation 2 to Section 10AA by raising a single consolidated invoice. The ITAT distinguished the facts from other cases cited by the Revenue and held that the assessee rendered services to foreign customers outside India, and the services were utilized in their businesses outside India, making the receipts non-taxable. The issue of taxability under DTAAs was left open for determination. The appeal was decided in favor of the assessee.
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