The Tax PublishersITA No. 1217/Kol/2017
2021 TaxPub(DT) 0859 (Pune-Trib)INCOME TAX ACT, 1961
Section 263 Section 9(1)(vii) Section 90
Headquarters Common Expenses' received/receivable by US based assessee from its Indian subsidiary did not fall under the category of 'Fees for included services' as specified in article 12(4) of the DTAA as services rendered by assessee were not of any technical nature and assessee did not 'make-available' any technical knowledge, exerience, skill, know-how, etc., to NWIL. Therefore, assessment order could be construed as erroneous as well as prejudicial to the interest of revenue for not having included Rs. 9.14 crore in the total income, when the department itself accepted the same as not chargeable to tax for the immediately preceding assessment year.
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Revision under section 263 - Erroneous and prejudicial order - Receipt by UIS based assessee towards Headquarters service rendered to Indian subsidiary not taxed as fees for technical services -
Assessee, based at USA, received a sum of Rs. 9.14 crore from its Indian subsidiary NWIL for rendering Headquarters services. This amount was held as Business profits under Article 7 of the DTAA and resultantly not chargeable to tax in the absence of it having any PE in India in terms of article 5 of Indo-US DTAA. CIT treated such amount as Fees for Technical Services under section 9(1)(vii) read with article 12 of DTAA and accordingly treated order passed by AO as erroneous and prejudicial to the interest of revenue. Held: Headquarters Common Expenses' received/receivable by US based assessee from its Indian subsidiary did not fall under the category of 'Fees for included services' as specified in article 12(4) of the DTAA as services rendered by assessee were not of any technical nature and assessee did not 'make available' any technical knowledge, exerience, skill, know-how, etc., to NWIL. Even though AO did not discuss the issue of taxability of receipt of Rs. 9.14 crore in the assessment order, but he did make inquiry on it, sought clarifications from assessee, applied his mind and got satisfied about its non-taxability on the basis of the view taken by him in the assessment order under section 143(3) for the immediately preceding assessment year, namely, 2010-11. The simpliciter fact of non-discussion of such an aspect in the assessment order cannot be decisive justifying revision in every case. Therefore, assessment order could be construed as erroneous as well as prejudicial to the interest of revenue for not having included Rs. 9.14 crore in the total income, when the department itself accepted the same as not chargeable to tax for the immediately preceding assessment year.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
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