TaxTMI 
TaxTMI 
2024 (1) TMI 1004
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.... "1. On the facts and circumstances of the case and in law, the notice issued u/s 148 of the Act is bad in law. 2. On the facts and circumstances of the case and in law, the draft order passed by the AO u/s 147 r.w.s. 144C of the Act is bad in law. 3. On the facts and circumstances of the case and in law, the AO erred in taxing the receipts of the Assessee amounting to Rs. 11,99,47,943/- as Fees for Technical Services (FTS) at the rate of 10% plus applicable surcharge and cess u/s 115A of the Act." 3. The grounds are being adjudicated on the merits of the issue as to "whether Fees for Technical Services is taxable in India as per the India-Thailand Treaty or not". 4. Brief facts for adjudication of the case ....
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....regularity of receipts, substantial involvement of taxpayer, frequency and volume of transaction etc. The assessee submitted that such attributes are missing in the impugned transaction between the Service Provider and the Beneficiary in this case. Further, such incomes are being received by the assessee at a predetermined amount as specified by the Service Level Agreements. Scrutiny of nature of service provided as specified in the agreement indicates that these are broadly managerial technical or consultancy services in nature, which broadly comes within the sweep of FTS. 8. The chargeability of FTS is provided u/s 9(1)(vii) of the Act, which is as below: "Income by way of fees for technical services payable by- (a) T....
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....ations. Since both India and Thailand have not agreed to taxability of FTS under relevant DTAA, the assessee cannot claim benefit of absence of FTS clause in the DTAA to its advantage. The tax treaties do not levy tax but allocate the taxing rights among the contracting states. Further the income of nature of FTS is clearly sourced from India and such income has to be taxed in India in the absence of specific benefit under DTAA. The ld. DRP held that the assessee has tried to structure these FTS payments through group entities in such way to avoid attracting of taxation under the Act and this is clearly a tax avoidance scheme which is squarely assailed under limitation of benefit (LOB) as specified under article 27 of DTAA between India and....
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....een made in other articles of the tax treaty, then those provisions would apply to the items. However, in case it is found that those provisions are not applicable then the items of income would have to be considered in Article 7. The relevant extract of the judgment has been reproduced below: "... It was also contended by the revenue that if article 12(3)(g) of the DTAA was not applicable then one had to go back to the domestic law, namely, the Act and tax; the receipt as fees for technical services within the meaning of section 9(1)(vii)(b) read with Explanation 2 there under. What article 7(7) seems to convey is that where the business profits of the non-resident include items of income for which specific or separate provisions ....
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....dia and the income is attributable to activities or functions performed by such permanent establishment. The relevant extract of the judgement has been reproduced below: "41. The next aspect of this issue, which is raised as Ground No. 8 in the Department's Appeal is that, when the treaties do not contain FTS clause, what is the impact on taxability. Wherever FTS clause is not available in the treaty with a country, then the income in question would be assessable as business income and it can be brought to tax in India, only if the FTO has the permanent establishment in India and if the earning of income is attributable to activities or functions performed by such permanent establishment. This view is supported by the decision ....