2023 (2) TMI 174

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....KUMAR J., These appeals by the Revenue, directed against common order passed by the ITAT [Income Tax Appellate Tribunal] dated January 24, 2014 in ITA No. 491/Bang/2013 and connected cases have been admitted to consider following questions of law: 1. Whether on the facts and in the circumstance of the case, and in law the Tribunal was correct in holding that payroll services rendered by IBM Philippines to the assessee is not Technical Services but constitute business profits and hence Section 195 of the Act is not attracted? 2. Whether on the facts and in the circumstance of the case, and in law the Tribunal was correct in holding that IBM Philippines has rendered services to the assessee in the course of business carri....

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....ducting tax at source. The AO [Assessing Officer] concluded that in respect of payments made towards FTS [Fees for Technical Services] TDS ought to have been deducted under Section 195 of the Income Tax Act, 1961 (the Act for short). Assessee was treated as 'assessee in default' under Section 201 of the Act. The CIT(A) [Commissioners of Income Tax (Appeals) vide order dated February 2, 2013.] confirmed AO's order. Assessee challenged the said order before the ITAT [Income Tax Appellant Tribunal]. By the impugned order, the ITAT has allowed the appeal holding that the payments made by the assessee were not chargeable to tax under the India-Philippines DTAA [Double Taxation Avoidance Agreement required to be deducted. Hence, this appeal by th....

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....e to IBM India. For the services rendered to P&G India on behalf of the assessee, assessee was paying the service charges to IBM Philippines. Therefore, it was 'income earned' in the hands of IBM Philippines; • as per Section 90(2) of the Act, the provisions of the Act or DTAA whichever is more beneficial to the assessee has to be applied. In support of his contention, he relied upon Union Of India v. Azadi Bachao Andolan [[2003] 132 Taxman 373 (SC)]. 7. With the above submissions he prayed for dismissal of these appeals. 8. We have carefully considered rival contentions and perused the records. 9. Undisputed facts of the case are, assessee has entered into an agreement with P&G India to render certain services. It has....

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.... not arise for consideration because, as recorded in para 7.3.9 of impugned order, Revenue has taken a specific contention that FTS was absent under the India-Philippines Treaty. Further, it is also not in dispute that under the agreement, IBM Philippines was rendering service in the field of payroll, data management etc., in connection with the work/assignment described in the agreement between IBM India and P&G India. 13. The ITAT has, in our considered view rightly recorded in para 8.1.3 of its order that as per Article 7(1) of Indian Philippines DTAA, the business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a perma....