TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 419
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....on to the tune of Rs. 1,02,54,839/- which additions were challenged by the assessee by filing objection before the ld. DRP which objections stood dismissed by ld. DRP, and which culminated into an directions dated 06.12.2023 issued by ld. DRP u/s 144C(5) of the Act. 2. The brief facts of the case are that in the case of the assessee, specific information was flagged as per High Risk Management Strategy formulated by the CBDT under clause (i) to Explanation 1 to Section 148 of the Act. As per the specific information, the assessee namely M/s Contec Technologies DMCC, Dubai (now known as Youcloud DMCC, Dubai) had received Rs. 1,02,54,839/- from M/s Comviva Technologies Ltd., India(In short 'Comviva, India'), as Fee for Technical Services (FTS) during the financial year 2017-18, but, the same was not offered to tax in India by the assessee. It was also observed by the AO that the remitter Comviva, India has not deducted TDS on such remittance. During the verification proceedings of Form No. 15CA/15CB in the case of Comviva, India, it was found that payments were in the nature of FTS, and the same were liable to tax in India as per provisions of the 1961 Act. The AO further observed....
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....tted that receipts from M/s Comviva, India were FTS in nature. The AO observed that there is no FTS clause in the India-UAE DTAA, and hence the aforesaid income is to be brought to tax as per provisions of the 1961 Act, and the assessee cannot claim that said FTS be charged to tax as business income. It was observed by the AO that the assessee can claim applicability of provision of DTAA to the extent it is contrary to the provisions of the 1961 Act, as the provisions of DTAA or provisions of the Income-tax Act, 1961, whichever is more beneficial to the assessee shall be applicable. But, in the instant case, there is no clause governing FTS in India-UAE DTAA, and hence provision of the 1961 Act shall be applicable. The AO rejected the contention of the assessee that in absence of FTS clause in India-UAE DTAA, FTS is to be treated as Business Income and in view of no PE in India, the same cannot be brought to tax in India. It was observed by the AO that the treaties are entered into between the two countries, and they are to be read in good faith. The AO observed that the said income is chargeable to tax in the hands of the assessee u/s 5(2) r.w.s. 9(1)(vii) of the Act as deeming fi....
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....ed company. It was submitted that the assessee provided some of the services in UAE to Branch office in Dubai of Comviva, India for their client Etisalat, Dubai. It was submitted that no services were provided in India. It was reiterated that the said Indian company Comviva, India has a branch office in Dubai which has awarded the work to the assessee, and the assessee was dealing with the said branch office in Dubai and rendering services in Dubai, UAE to Comviva Branch office at Dubai for their client Etisalat, Dubai, UAE. It was submitted that it is only for the administrative convenience and centralization of purchases that the Indian head office i.e. Comviva, India has issued the purchase order to the assessee. It was brought to our attention that even in the purchase order, it is mentioned that: "Ship to HO: PO Box: 109594, Abu Dhabi". Our attention was drawn to Page 7&10/PB, wherein purchase order(s) are placed. It was submitted that the nature of services were towards implementation charges, onsite project management services and onsite engineer support services. It was submitted that the services might be technical in nature and accepted by the assessee to be Fee for Techn....
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....the fees is payable by a resident in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. 7. For the facts of our case, as the receipt by the Company is in respect of services provided in UAE for the source of business in UAE and for the purpose of earning income in UAE(as customer base is also in UAE). There ought to be any income/receipt chargeable to Tax in India. 8......" 5.3 The Ld. counsel submitted that since the assessee was dealing with the branch office in UAE of an Indian company namely Comviva India, and the services were rendered by the assessee outside India, the same cannot be brought to tax in India. The assessee relied upon the judgment and order of Hon'ble Delhi High Court in the case of International Management Group(UK) v. CIT (2024) 164 taxmann.com 225(Del HC), decision of ITAT, Delhi Benches in the case of HCL Australia Services Pty Ltd v. DCIT (2024) 169 taxmann.com 169(Del-trib.). The assessee also relied on the order of the Tribunal in the case McKinsey Business Consultants Sole Partner Limited Liability Company....
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....2024] 159 taxmann.com 90 (Delhi-Trib.); DCIT v. Michelin ROH Co. Ltd. [2022] 138 taxmann.com 497 (Delhi-Trib.); Global Vectra Helicorp Ltd. v. DCIT [2024] 159 taxmann.com 282 (Delhi-Trib.), and submitted that since there is no PE in India, FTS is to be treated as business income and, hence, since the services were rendered outside India, consumed outside India, the same are not to be taxed in India. 6.1 We have heard rival submissions and considered the material placed on record. We have observed that the assessee is a company incorporated under the laws of UAE. The assessee has claimed to be tax-resident of UAE. The assessee has claimed to be engaged in the business of system integrator in providing messaging service, namely SMS, chatbot, MMS, e-mail, etc. to the mobile network operators in the UAE. It is claimed by the assessee that it supports in installation, commissioning and support of the platforms. It provides the following main services:- (a) Installation of hardware, software of SS & related products in Dubai & Abu Dhabi; (b) Testing of telecom application; and (c) Performance testing and scalability of testing. 6.2 The proceedings u/s 147....
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....ce outside India], Therefore, no services were provided in India or to a customer in India. 3. Comviva Technologies, Dubai office released a purchase order dated 17th October 2016 to Contec Technologies DMCC through their company headquarter based in India which executes central purchases [for the purpose of administrative convenience]. Please refer the purchase order No.30951,32289 & 32109 attached for your reference. We have attached the same as Annexure 2. 4 & 5... 6. We wish to humbly submit that we are engaged in the business of providing services in UAE and not to any source in India. Accordingly we wish to respectfully submit that no income is accrued/arisen in India. We also wish to submit that section Sub clause b of section 9(1)(vii) of the Act provides that a fees shall not be considered as fees for technical service, where the fees is payable by a resident in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. 7. For the facts of our case, as the receipt by the Company is in respect of services provi....
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....e fees for technical services were received for services utilized/consumed by business carried on by the Branch office in UAE of Comviva, India, and the source of earning income is located outside India which is the Branch office in UAE of Comviva, India. Thus, it is claimed that income received by the assessee by way of Fees for Technical Service to the tune of Rs. 1,02,54,839/- cannot be brought to tax in India. The contention of the department on the other hand is that the contract and/or purchase orders were issued by Comviva, India and hence the contracts/purchases were concluded in India, and also further it is claimed by Revenue that it is the Comviva, India who executed the most of the project from India, hence the fee for technical services paid to the assessee is chargeable to tax in India as the services rendered by the assessee are utilized/consumed in India. The department has relied on the decision of Hon'ble Delhi high Court in the case of Havells India Limited (supra). The department has not given any finding on the claim of the assessee to have dealt with Branch office in Dubai of Comvia, India and/or that the Branch office in UAE of Comviva, India which got the co....