ASIAN HONDA MOTOR CO. LTD.,THAILAND V. DEPUTY COMMISSIONER OF INCOME TAX, DDIT/ADIT (INTERNATIONAL TAXATION), NOIDA, NOIDA

SA 75/DEL/2025

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The case involves Asian Honda Motor Co. Ltd., a tax resident of Thailand, which received payments from Honda Motor Cycle and Scooter India P. Ltd. (HMSI) amounting to INR 10,84,21,790 for services rendered, classified as Fee for Technical Services (FTS). The primary legal issue was whether these receipts were taxable in India under the India-Thailand Double Taxation Avoidance Agreement (DTAA). The assessee argued that the DTAA does not specifically provide for taxing FTS and that the receipts should be considered under 'Business Profits' as there was no Permanent Establishment (PE) in India. The Tribunal considered previous assessments and judicial precedents supporting the assessee's position and granted a stay on the demand pending further proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472461 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 14-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: Solvay Asia Pacific P Ltd. vs. DCIT, Bangkok Glass Industry Co. Ltd. vs. ACIT, Denso (Thailand) Co. Ltd. vs. ACIT
• Laws Referred To: India-Thailand DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI
• Keywords: Business income; Double taxation relief; Permanent establishment; Application of stay
• Section: 22

Judgement Text

" आयकर अपीलीय अिधकरण िदʟी पीठ “डी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं अवधेश क ुमार िमŵा, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER SA No. 75/Del/2025 (Arising out of ITA No. 711/Del/2025, A.Y 2022-23) Asian Honda Motor Co. Ltd., No.14, Sarasin Building, Surasak Road, Khwaeng, Silom Khet Bangrak, Bangkok Metropolis, Thailand 10500 PAN: AAICA-2531-P ...... आवेदक/Applicant बनाम Vs. Deputy Commissioner of Income Tax, DDIT/ADIT (International Tax), R. No.602, 6th Floor, Aayakar Bhawan, A-2D, Sector 24, Gautam Budh Nagar, Noida, UP 201307 ..... ᮧितवादी/Respondent आवेदक/Applicant : S/Shri Kamal Sawhney & Nikhil Aggarwal, Advocates ŮितवादीȪारा/Respondent by : Shri Ashish Tripathi, Sr. DR सुनवाई कᳱ ितिथ/ Date of hearing : 14/02/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : 14/02/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This application has been filed by the assessee for seeking stay on recovery of outstanding demand for assessment year 2022-23. 2. Shri Kamal Sawhney, appearing on behalf of the assessee submits that the total outstanding demand including interest but after payment of advance taxes is Rs.6,34,30,500/-. During the period relevant to assessment year under appeal, the 2 SA No.75/DEL/2025 assessee/applicant received Rs.10,84,21,790/- from Honda Motor Cycle and Scooter India P. Ltd. (HMSI). The said receipts were in the nature of Fee for Technical Services (FTS). The applicant is tax resident of Thailand. India-Thailand DTAA does not contain any provision for taxing FTS. In the absence of any specific clause in DTAA, such receipts are to be taxed under the head ‘Business Profits’. The applicant does not have any Permanent Establishment (PE) in India, hence, the receipts are not taxable in India. The fact that the applicant does not have PE in India has been examined and accepted by the Revenue in earlier assessment years. The services which are subject matter to tax in impugned assessment year are identical to services rendered by the assessee in AY 2020-21. In AY 2020-21 the receipts against rendering of such services were considered by the AO and vide order assessment order dated 28.09.2023 accepted the receipts as ‘Business Income’. In the said assessment year similar submissions were made by the assessee that FTS receipts were not taxable under India-Thailand DTAA as the FTS article is absent in Treaty and the applicant had no PE in India. The ld. Counsel further submitted that there are several judicial precedents which supports the case of assessee that where DTAA contains no separate provision relating to FTS, such receipts would be analyzed with reference to Article 7 of India-Thailand DTAA dealing with ‘Business Profits’ and not Article 22 which refers to ‘Other Income’. To support his argument he placed reliance on following decisions:- (i) Solvay Asia Pacific P Ltd. vs. DCIT, 159 taxmann.com 90 (Delhi-Trib.); (ii) Bangkok Glass Industry Co. Ltd. vs. ACIT 34 taxmann.com 77 (Madras); & (iii) Denso (Thailand) Co. Ltd., vs. ACIT, 163 taxmann.com 257 (Delhi Trib.). 3 SA No.75/DEL/2025 3. Per contra, Shri Ashish Tripathi representing the department vehemently opposed Stay Application of assessee. He submitted that if at all benefit of stay is to be extended to the assessee, the assessee may be directed to deposit 20% of outstanding demand. 4. Both sides heard. The Assessing Officer (AO) has made addition of Rs.10,84,21,790/- received by the assessee in lieu of services rendered to HMSI. The assessee has contended that the said payment is in the nature of FTS. Since, there is no specific provision of taxability of FTS in India-Thailand DTAA, the AO has erred in holding aforesaid receipts taxable under Residual Article 22 of the Treaty as ‘Other Income’. The contention of the assessee is that the assessee has no PE in India, hence, not taxable in India. In any case such receipts fall under ‘Business Income’ and has to be considered in light of Article 7 of DTAA. To support his contention, the assessee has placed reliance on various decisions. The assessee has also pointed that similar receipts in preceding assessment year i.e. AY 2020-21 were offered to tax as ‘Business Income’ and the same was accepted by the Assessing Officer vide order dated 28.09.2023. The Counsel for the assessee pointed that, if, the contention of the Revenue is to be accepted, the receipts are taxable at the rate of 40%, whereas, if the receipts are taxable as ‘Business Income’, the same are liable to be taxed at the rate of 10%. Considering entire facts, prima facie we are of considered view that the assessee has been able to make out a case for stay of demand. Accordingly, recovery of outstanding demand for AY 2022-23 is stayed for a period of 180 days from the date of this order or till disposal of appeal, whichever is earlier. 4 SA No.75/DEL/2025 5. The Registry is directed to list appeal for hearing on 16.04.2025. Since, the date of hearing of appeal has been announced in the open court, issuance of separate notice of hearing to the parties is dispensed with. 6. Paper book, if any; be filed on or before the next date of hearing with an advance copy to the opposite side, in accordance with ITAT Rules. 7. It is made clear, that any observation made in the Stay Application does not reflect any opinion on merits of the case and the appeal of assessee has to be decided on merits, without getting influenced by any expression/observation in the Stay Application. 8. In the result, Stay Application of the assessee is allowed in the terms aforesaid. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद˟/ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 14/02/2025 NV/- ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. 5 SA No.75/DEL/2025 BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "