Case Number: ITA 119/DEL/2021
Appellant: Inteva Products Netherlands BV, Netherlands
Respondent: ACIT Circle-International Taxation -2(1)(1), New Delhi
Assessment Year: 2017-18
Result: 2017-18
Case Filed on: 2021-02-18
Order Type: Final Tribunal Order
Date of Order: 2023-03-02
Pronounced on: 2023-03-02
The appellant, Inteva Products Netherlands BV, filed an appeal against the order of the Assessing Officer (AO) passed under Section 143(3) read with Section 144C of the Income-tax Act, 1961, pursuant to the directions of the Dispute Resolution Panel (DRP).
The AO had treated the receipt of fees for business support services amounting to INR 11,85,39,571 as Fees for Technical Services (FTS) as per Article 12 of the tax treaty between India and the Netherlands. The appellant contended that the services were managerial in nature and did not fall within the definition of FTS. The AO had added this amount to the total income of the appellant, which was challenged by the appellant before the tribunal.
Ground 1: The AO, pursuant to the directions of the DRP, erred in treating the receipt of fees for business support services as FTS under Article 12 of the India-Netherlands DTAA without appreciating that the services are managerial in nature and hence do not fall within the definition of FTS.
Ground 2: Without prejudice to Ground 1, the AO erred in treating the fees for business support services as FTS without appreciating that the services rendered by the appellant do not make available technical knowledge to the recipient and hence cannot be taxed in India.
Ground 3: The AO erred in levying surcharge and education cess on income chargeable to tax under the tax treaty between India and the Netherlands.
Ground 4: The AO erred in initiating penalty proceedings under section 270(A) of the Act on the adjustment made in the final assessment order.
The tribunal noted that the issue at hand was identical to the one decided in the appellant’s own case for the assessment year 2014-15. The tribunal had previously held that the payment received by the appellant could not be treated as FTS under Article 12(5) of the India-Netherlands DTAA, as the services rendered were managerial in nature and did not involve the make available of technical knowledge, skill, or know-how to the recipient.
The tribunal referred to the order in ITA No.7545/Del/2017, where it was established that the services provided were in the nature of business support, and the payment received could not be treated as FTS under the DTAA. The tribunal found no distinguishable features in the current case to deviate from its earlier decision.
The tribunal concluded that the payment received by the appellant for business support services could not be treated as FTS under Article 12(5) of the India-Netherlands DTAA. Consequently, the addition made by the AO was deleted, and the appeal was allowed.
In the result, the appeal filed by the appellant for the assessment year 2017-18 is partly allowed.
Order pronounced in the open court on 2nd March 2023.
Shamim Yahya, Accountant Member
Anubhav Sharma, Judicial Member
Inteva Products Netherlands BV vs. ACIT Circle International Taxation – 2(1)(1), New Delhi
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