This case discusses the appeal filed by the Revenue against the order of the CIT(A) which pertained to the Assessment Year 2015-16. The primary issue was whether the receipts from Aedas Pte. Ltd., a Singapore-based architectural firm, for providing design services in India, constituted Fees for Technical Services (FTS) or royalties under the India-Singapore Double Taxation Avoidance Agreement (DTAA).
The Revenue contended that the payments to Aedas for its architectural design services should be considered as FTS, as they involved the transfer of technical knowledge and made such knowledge available to Indian clients. Alternatively, it was argued that these payments could be classified as royalties, given that they pertained to the use of intellectual property.
The tribunal noted that the services provided by Aedas did not meet the criteria of making technical knowledge available to the clients that would allow them to apply this knowledge independently. Consequently, the payments were held not to constitute FTS under the specific provisions of the India-Singapore DTAA. Furthermore, it was determined that the payments were not for the use of or the right to use intellectual property and therefore could not be considered royalties.
This ruling is significant as it clarifies the interpretation of FTS and royalties in the context of international taxation and DTAA between India and Singapore, specifically in the field of architectural services. It underscores the importance of the exact nature of services and the contractual terms in determining tax liabilities under DTAAs.
DCIT vs. Aedas Pte. Ltd.: Architectural Designs FTA & Royalty Dispute – ITA 716/DEL/2020
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