TaxTMI 
TaxTMI 
2026 (2) TMI 1379
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....e Appellant of INR 21,96,83,550 during the year under consideration by treating the same as 'fees for technical services' in terms of section 9(1)(vii) of the Income-tax Act, 1961 as well as Article 12 of the Double Taxation Avoidance Agreement entered between India and Singapore ("India-Singapore Tax Treaty"). 1.2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject, the fabrication charges received by it are not fees for technical services' either under the Income-tax Act, 1961 or under the provisions of the India-Singapore Tax Treaty. The stand taken by the AO/DRP in this regard is erroneous, misconceived and not in accordance with the law. 1.3 The Appellant submits that the AO be directed to delete the addition of INR 21,96,83,550 so made and to re-compute its total income accordingly. 2.0 Re: Taxing income from fees for technical service at the rate specified under the Act: 2.1 Without prejudice, The AO erred in charging tax at a rate of 10% plus surcharge and health and education cess under section 115A of the Act on income from fees for technical services of INR 21....
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....show cause as to why the said amount should not be taxed as fees for technical services as the nature of services rendered are ancillary and subsidiary to the enjoyment of exclusive rights of know-how and patents enjoyed by the assessee in specialized glass fibre manufacturing. In response, the assessee submitted that in order to fall within the purview of Article 12(4)(a) of the India-Singapore DTAA, the services rendered should be ancillary and subsidiary to the application or enjoyment of the property for which a "Royalty" payment is received. The assessee submitted that in the instant case, no Royalty is received by the assessee under Article 12(3) of the India-Singapore DTAA. It was submitted that the assessee does not enjoy any know-how or patent rights for the manufacturing of specialised glass fibre, and there is no Royalty received by the assessee to which the said services could be called ancillary. Accordingly, the assessee submitted that the receipts towards fabrication charges cannot be treated as FTS under Article 12(4)(a) of the India-Singapore DTAA. As regards the provisions of Article 12(4)(b) of the India-Singapore DTAA, the assessee submitted that in order for a ....
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....e. 6. In conformity with the directions issued by the Ld.DRP, the AO vide impugned final assessment order dated 10-07-2025, assessed the fabrication charges received by the assessee as FTS under section 9(1)(vii) read with Article 12(4) of the India-Singapore DTAA. Being aggrieved, the assessee is in appeal before us. 7. During the course of hearing, the Ld.AR submitted that it is a recurring issue and the matter has been decided in favour of the assessee by various Coordinate Benches of the Tribunal in assessee's own case for the earlier assessment years right from assessment year 20212-13 onwards. The Ld.AR submitted that facts and circumstances of the case are identical to the earlier years and therefore, the orders so passed by the Coordinate Benches for the earlier years may be followed and necessary relief be provided to the assessee. 8. The Ld. DR has been heard who has relied upon the orders passed by the lower authorities. At the same time, the Ld.DR fairly submitted that there are no changes in the facts and circumstances of the case as noted by the AO and DRP and the matter is covered by the earlier decisions of the Coordinate Benches. It was also submitted ....
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....t described in paragraph 3 is received". On the facts of this case, it is also not in dispute that no such payments, were made to the assessee by its Indian affiliate, which will be covered by Article 12(3) of the Indo-Singapore treaty. Yet, taxability under Article 12(4)(a) is invoked, on the ground that one of the group companies, i.e. OC-US, has received such payments from the Indian affiliate. OCIPL, which are covered by Article 12(3) of Indo-Singapore tax treaty, and by invoking Article 9. The stand of the Assessing Officer and the DRP is that since the alloys are provided by the OC-US, which is an associated enterprise under article 9, one has to proceed on the basis that the alloys are provided by the assessee, and as the services are "ancillary and subsidiary to the application or enjoyment of the right, property or information" for which payment is made to OC-US, these services are taxable as fees for technical services. 11. As far as the role of Article 9 is concerned, it comes into play when "conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterp....
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....ement, in a manner as deemed commercially expedient. The question that we have to really consider is whether or not the activity leading to income was actually carried out in that jurisdiction, and there is no dispute on that aspect at all. The fact that an arrangement regarding situs of entities providing different facilities, in connection with a transaction of the multinational group, is done in a tax-efficient manner, cannot be reason enough to disregard the arrangement. We are satisfied that so far as the income of the assessee from the refurbishing of the bushes is concerned, it is not taxable in India as the provisions of Article 12(3) cannot be invoked in this case, and that, so far as the provisions of Article 12(4)(a) are concerned, these provisions cannot be invoked as the assessee has not rendered these services in connection with the services "for which a payment described in paragraph 3 is received by the assessee. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and delete the impugned addition of Rs.4,84,44,048. The assessee gets the relief accordingly." 10. We find that following the aforesaid de....