TaxTMI 
TaxTMI 
2022 (1) TMI 1486
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....xation Avoidance Agreement ('DTAA'). 2. Ground No. II - Taxability of amount received as common cost recharge as Royalty and Fees for technical services (FTS) 2.1 On the facts and in the circumstances of the case and in law, the learned DRP ('Dispute Resolution Panel') and DCII have erred in considering common cost recharge amounting to INR 4,39,80,878/- as Royalty and Fees for technical services ('FTS') as per Article 13 of India- UK Double Taxation Avoidance Agreement ('DTAA'). 3. Ground No. Ill - Erroneous rate of tax applied while computing tax payable 3.1 Without prejudice to the above grounds, on facts and circumstances of the case and in law, the learned DCIT has erroneously applied a tax rate of 15% as per India-UK DTAA instead of applying a beneficial rate of 10.506% under the Income Tax Act, 1961 while computing the amount of tax payable by the Appellant. 4. Ground No. IV - Erroneous levy of consequential interest under section 234B 4.1 On facts and circumstances of the case, the learned DCII has erred in levying consequential interest under Section 234B of the Act, amounting to INR 10,4....
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....h is not included in total income by the assessee as they does not make available any knowledge, skill process know -how and experience to Buro india as per the terms of the India -UK DTAA .The A.O found the submissions of the assessee are not acceptable as it is evident on reading the provisions of the original agreement made on 01.04.2013 the basis on which the services under cost charge are provided and the applicable provisions of the Act and the India-UK DTAA. The A.O has dealt on the transactions of the Assessee with the Associate Enterprises (AE) agreement and the provisions of royalty and the fees for technical services in the India-UK DTAA. Finally the A.O has treated Rs. 4,39,80,875/- received by the assessee under the head cost recharge as income from royalty as per the Sec. 9(1)(vi) of the Act and Article 13 of the India - UK DTAA. The A.O has observed at page 16 Para 8 of the order on the discussions of the DRP and has passed the order : "8. Discussions and directions of DRP: while deciding the appeal of the assessee in this regard, on the both grounds i.e addition of Rs. 46,20,066/- made towards consulting engineering services and addition of Rs. 4,39,80,878/....
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....he A.O are not acceptable. Whereas on the similar facts in the earlier years the Hon'ble Tribunal in the assessee's own case has granted the partial relief and referred to the findings and with respect to fees for technical services and royalty payments and further supported the submissions with the orders of the Hon'ble Tribunal. Contra, the Ld. DR relied on the findings of the DRP and orders of the lower authorities.. 6. We heard the rival submissions and perused the material available on record. The assessee has raised the ground of appeal No. 1 & 2 with respect to taxability of consulting and engineering services as fees for technical services (FTS) and taxability of amount received as common cost recharge as royalty and fees for technical services(FTS). Whereas, on both these transactions, the A.O has made the addition and the DRP has confirmed the action of the A O. We find on the similar and identical issue, the decision of the Co ordinate bench of the Hon'ble Tribunal for the A.Y 2015-16 in assessee's own case in ITA No. 834/M/2019 dated 13.12.2020 dealt at page 3 Para 3 to 3.8 which is read as under: 3. We have heard rival submissions and perused the materials ....
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.... being management cost recharges does not make available any knowledge, skill, process, know-how and experience to Buro India as per the terms of the India-UK DTAA. During the assessment proceedings, the assessee has given an explanation as to why the amount received under this head has not been offered to tax. 3.3. The assessee submitted that it incurs various costs for the benefit of Buro group and hence, these costs are allocated group entity passed on certain pre-determined cost allocation key as per the cost allocation agreement. Accordingly, during the year under consideration, the assessee had raised common costs amounting to Rs. 2,49,71,127/- to Buro India in respect of IT functions, business development, finance, human resource management, operations, project management function, corporate and commercial. The assessee pleaded that the transactions are governed by the India-UK DTAA as assessee is a tax resident of UK. He pleaded that as per Article 13 of India-UK DTAA, Fees for technical Services ("FTS") provided by foreign company would be taxable in India on gross basis. The relevant extract of the definition of FTS as per Article 13 of India-UK DTAA is reproduce....
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....solutely no bar if the assessed income goes below the returned income as ultimately only the real income should be brought to tax in accordance with law which would also be in consonance with the Article 265 of the Constitution of India. He vehemently argued that the department could not be unjustly enriched merely because certain amounts had been erroneously offered to tax by the assessee. He placed reliance on the decision of the Hon'ble Gujarat High Court in the case of Milton Laminates Ltd., vs. CIT reported in 37 Taxmann.com 249 (Guj) and Gujarat Gas Company Ltd., vs. JCIT reported in 245 ITR 84. We find lot of force in the said arguments of the ld. AR and we find that issue involved in the additional ground and the regular ground No. 1 was the subject matter of adjudication of this Tribunal in assessee's own case for A.Y. 2014-15 in ITA No. 7111/Mum/2017 dated 13/11/2019 wherein the exactly similar arguments were advanced by the ld. DR for that year also. We find that this Tribunal for A.Y. 2014-15 in assessee's own case had admitted the additional ground and disposed off the issue in dispute as under:- "3.1 Facts on record would reveal that the assessee being non-re....
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....perience, skill, know-how or processes to the recipient of service. Therefore, such services would be classified as business income and not taxable in India in the absence of Permanent Establishment (PE) in India as per Article-7 read with Article-5 of India-UK DTAA. 3.4 However, Ld. AO formed an opinion that the income earned by the assessee was taxable in India as per Section-9 of the Act and Article 13 of India-UK ITA No. 834/Mum/2019 M/s. Buro Happold Limited 8 DTAA both s royalty as well as fees for technical services. Since, as per the agreement, the assessee was entitled for mark-up of 5%, the said receipts were enhanced to that extent and brought to tax. 3.5 Aggrieved, the assessee raised objections against the proposed addition before Ld. DRP. The Ld. DRP, after considering assessee's submissions, confirmed the stand of Ld. AO by noticing that the services being rendered by the assessee were ancillary and subsidiary to the application or enjoyment of right of the assessee in brand used by the Buro- India and the payment was royalty in terms of para 3(a) of Article-13 of the treaty and therefore, its nature was that of fees for technical services. Aggr....
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....3, the Ld. AR submitted that DCIT has erroneously applied the tax rate @15% as per the India- UK DTAA instead of applying the beneficial rate @10.506%. The Ld.AR submitted that on the similar ground of appeal was raised in the earlier assessment year (A.Y.) 2015-16 and the Hon'ble Tribunal has granted the relief. At this juncture, we considered it appropriate to refer the findings of the Hon'ble ITAT at page 9 Para 4 to 4.1 of the order as under; 5. The ground No. 2 raised by the assessee is with regard to levy of surcharge and education cess on tax calculated at special rates under the DTAA. 4.1. We have heard rival submissions and we find that the issue in dispute is squarely allowed in favour of the assessee by the Co-ordinate Bench decision of Hyderabad Tribunal in the case of RAK Ceramics UAE vs. DCIT International Taxation (2), Hyderabad reported in 104 Taxmann.com 380 dated 29/03/2019 wherein it was categorically held that surcharge and education cess could not be added to connotation "tax" when the same is calculated as per DTAA. We find that the Hyderabad Tribunal while rendering this judgment had inturn placed reliance on the co-ordinate Bench decision o....