TaxTMI 
TaxTMI 
2026 (9) TMI 2023
X X X X Extracts X X X X
X X X X Extracts X X X X
....nafter referred to as "CIT(A)], dated 23.07.2019. The assessee in appeals has challenged the order of CIT(A) on following grounds: "1. The learned CIT(A) erred in confirming the addition of management service fee of Rs. 2,83,04,041/-, received by the appellant, by holding it to be taxable as "fees for technical services" under the provisions of the Act as well as under Article 12 of the Double Taxation Avoidance Agreement between India and China. 2. The learned CIT(A) erred in making the following observations: "Hence, for the FTS income to be taxable in India, the rendition of services in India is not necessary, it is sufficient that the services are utilized in India." The appellant objects to the above observations made by the learned CIT(A). 3. Sh. Sudin Sabnis, appearing on behalf of the assessee submits that the assessee a wholly foreign-owned company established in Shanghai is a tax resident of China. The assessee is a part of Benteler group. The assessee is engaged in manufacturing of automotive components. The assessee provides engineering, forensic, IT, sales, finance, human resources, quality, procurement and related services to its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered services does not equate to physical rendition of services in India. 4. Per contra Sh. M.V. Ramesh, Sr. DR, representing the department vehemently defending the impugned order and prayed for dismissing appeal of the assessee. The learned DR submits that it is an admitted fact that the services rendered by the assessee to Indian company is in the nature of management and technical services. The remuneration received for rendering such services fall withing the meaning of FTS under Article 12(4) of DTAA. It is immaterial from where services are rendered, the place of utilization of services is relevant to attract tax liability. The learned DR placed reliance on the decision of Tribunal in the case of Ashapura Minichem Ltd. Vs. ADIT (supra) to support his submissions. 5. Both parties heard, orders of the lower authorities examined, the decisions and the Service Agreement referred during the course of submissions considered. The limited issue for consideration before us in the present appeal is; Whether the payment received by the assessee during the period relevant to assessment year under appeal for rendering managerial and technical services from outside India, to its Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....titioner's case that it is a company incorporated under the laws of China and a resident of China. Under the Service Agreement (Exhibit "B" to Petition) entered into by the Petitioner with Benteler India (its subsidiary), the Petitioner supplies technical services to Benteler India. It is conceded before us that any payment made by Benteler India to the Petitioner [for the supply of technical services] would be taxed in India under the provisions of the IT Act, and more particularly Section 9(1)(vii) thereof. However, since India and China have entered into a Double Taxation Avoidance Agreement [for short the "DTAA"], taxation of the Petitioner would be governed by the provisions of the India-China DTAA as they are more beneficial to the Petitioner [Section 90 of the IT Act]. According to the Petitioner, it has no "Permanent Establishment" (for short "PE") in India [as understood in Article 5 of the DTAA], and hence, is not liable to pay any tax in India under Article 7 thereof, for the technical services provided by it to Benteler India. The only other provision under which the Petitioner can be brought to tax in India is Article 12 of the DTAA. According to the Petitioner, ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng rendered by the Petitioner to the Benteler India from China was through email communications, conference calls and video conferencing etc. This, according to the Respondents, is an undisputed factual position. According to the Respondents since these services were being rendered virtually through interactive modes on video conferencing or conference calls or emails, the nature and manner in which the services were provided, as per the law prevailing in India, even if done virtually, equates to and is the same as a physical rendition of services in India. 45. At the outset, this argument, though at first blush appears attractive, does not carry much substance. To give a very simple answer to this argument is that why can it not be assumed that Benteler India received these services in China and not in India as sought to be contended by the Respondents. The services may have been rendered in the presence of each other, but by merely saying that because the services were rendered to the Indian entity virtually, would mean that the services were physically rendered in India by the Chinese entity would be too broad a proposition for us to accept. Without there being any spec....