Sandvik IT Services AB (formerly known as Sandvik Information Technology AB), Pune V. Assistant Commissioner of Income-Tax (Internal Taxation), Cir-2, Pune

ITA 17/PUN/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 7838 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-04-2021
• Assessment Year: 2017-2018
• Appeal Filed On: 29-01-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.17/PUN/2021 / ASSESSMENT YEAR : 2017-18 SANDVIK IT SERVICES AB (FORMERLY KNOWN AS SANDVIK INFORMATION TECHNOLOGY AB) C/O SANDVIK ASIA PRIVATE LTD. MUMBAI PUNE ROAD, DAPODI, PUNE 411012 PAN: AADCA5375J VS. ACIT (INTERNATIONAL TAXATION), CIRCLE 2, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 01-06-2020 PASSED BY THE ASSESS ING OFFICER U/S 143(3) R.W.S. 144C(13) OF THE INCOME-TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IN RELATION TO THE ASSE SSMENT YEAR 2017-18. 2. THE APPEAL WAS FILED ON 29-01-2021 AGAINST THE FINAL ASSESSMENT ORDER DATED 01-06-2020, THEREBY CAUSING DELAY OF 166 ASSESSEE BY SHRI NIKHIL PATHAK REVENUE BY SHRI ANURAG SRIVASTAVA DATE OF HEARING 01-04-2021 DATE OF PRONOUNCEMENT 01-04-2021 ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 2 DAYS. HERE IT IS PERTINENT TO NOTE THAT AS PER THE GAZETTE OF I NDIA DATED 29-09-2020 PROVIDING RELAXATION OF LIMITATION IN THE SPECIFIED ACTS, IT HAS BEEN STATED THAT WHERE, ANY TIME-LIMIT HA S BEEN SPECIFIED UNDER THE SPECIFIED ACT, WHICH FALLS WITHIN THE PERIOD FROM 20 TH DAY OF MARCH, 2020 TO 31 ST DAY OF DECEMBER, 2020, OR AS FURTHER EXTENDED, THE LIMITATION SHALL STAND EXTEN DED UP TO 31 ST MARCH, 2021 OR AS FURTHER DIRECTED BY THE CENTRAL GOVERNMENT. THUS, IT IS APPARENT THAT THE CASE OF THE ASSE SSEE IS FULLY COVERED UNDER THE RELAXATION OF THE LIMITATION PROVIDED UN DER THE GAZETTE OF INDIA. THE DELAY IS ACCORDINGLY CONDONED AND THE APPEAL IS ADMITTED FOR HEARING. 3. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE TREATMEN T OF RS.34,93,09,947/- TOWARDS IT SUPPORT SERVICES PROVIDED B Y THE ASSESSEE TO ITS FOUR INDIAN AFFILIATES AS FEES FOR TECHNICAL S ERVICES (FTS) WITHIN THE MEANING OF ARTICLE 12 OF INDIA-SWEDEN DOUBLE TAXATION AVOIDANCE (HEREINAFTER ALSO CALLED `THE DTAA) REA D WITH INDIA-PORTUGAL DTAA (VIA PROTOCOL). 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON- RESIDENT COMPANY INCORPORATED IN SWEDEN, WHO FILED ITS RETURN DECLARING NIL INCOME. IT RENDERED IT SUPPORT SERVICES TO FO UR ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 3 ENTITIES IN INDIA: SANDVIK ASIA PVT. LTD.; WALTER TOOLS INDIA PVT. LTD.; SECO TOOLS INDIA PT. LTD.; AND DORMER TOOLS INDIA PVT. LTD . FOR A TOTAL CONSIDERATION OF RS.34,93,09,947/-. SUCH AN A MOUNT WAS CLAIMED TO BE NOT CHARGEABLE TO TAX IN INDIA AS NOT FALLING WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES UNDER ARTICLE 1 2 OF THE DTAA. THE AO CONSIDERED THE AGREEMENT DATED 01-04-2 002 BETWEEN THE ASSESSEE AND SANDVIK ASIA PRIVATE LIMITED (HEREINAFTER REFERRED TO AS SAPL) UNDER WHICH THE IT SUPPO RT SERVICES WERE PROVIDED BY THE ASSESSEE. HE TREATED SUC H RECEIPTS AS FEES FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE ACT AND F URTHER CAME TO HOLD THAT SINCE THE TECHNOLOGY WAS EMBEDDED IN THE HARDWARE AND IF THE INDIAN ENTITY WAS ENABLED TO USE THE SAM E, IT AMOUNTED TO MAKING AVAILABLE TECHNICAL SERVICES AND KNOW-HO W ETC. THE SAME WAS CONSEQUENTLY HELD TO BE COVERED WITHIN AR TICLE 12 OF THE DTAA AND HENCE CHARGEABLE TO TAX IN INDIA. THE AO FURTHER HELD THAT THE SERVICES RENDERED BY THE ASSESSEE CO NSTITUTED ROYALTY AND FTS U/SS. 9(1)(VI) AND 9(1)(VII) OF THE ACT. I N REACHING THIS CONCLUSION, HE RELIED ON THE DIRECTION GIVEN BY THE DRP IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2 016-17. THE DISPUTE RESOLUTION PANEL (DRP) DID NOT PROVIDE ANY REPRIE VE ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 4 TO THE ASSESSEE, WHICH LED TO THE TREATMENT OF RS.31,29,96, 084/- FROM SAPL; RS.3,00,40,632/- FROM WALTER TOOLS INDIA PVT. LTD.; RS.34,17,749/- FROM SECO TOOLS INDIA PVT. LTD. AND RS.28, 60,882/- FROM DORMER TOOLS INDIA PVT. LTD., AS FTS COVERED UNDER AR TICLE 12 OF THE DTAA. THE ASSESSEE HAS APPROACHED THE TR IBUNAL AGAINST SUCH INCLUSION. 5. WE HAVE HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND GO NE THROUGH THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE, A NON- RESIDENT, RECEIVED IT SUPPORT SERVICE FEE FROM FOUR INDIAN ENTITIES. FIRSTLY, WE ESPOUSE FOR CONSIDERATION A SUM OF RS.31.29 CRORE RECEIVED FROM SAPL. THERE IS NO DISPUTE ON THE NATURE OF SE RVICES RENDERED BY THE ASSESSEE TO SAPL, BEING, THAT OF DATA COMMUNICATION, OPERATIONAL SERVICES BACKUP AND RECOVERY SERVICES, HELP DESK, ETC. IT IS FUNDAMENTAL THAT THE AMOUNT IN QUESTION W OULD BE CHARGEABLE TO TAX, IF THE SAME IS TAXABLE UNDER THE ACT AND IS NOT IMMUNE FROM TAXATION UNDER THE DTAA. THE LD. AR FAIRLY CONCEDED THAT THE RECEIPT IN QUESTION IS COVERED U/S 9(1)(VII) OF THE ACT AS FEES FOR TECHNICAL SERVICES. HE HOWEVER, CONTE STED ITS CHARGEABILITY UNDER ARTICLE 12 OF THE DTAA. ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 5 6. BEFORE REACHING ANY CONCLUSION AS TO THE APPLICAB ILITY OR OTHERWISE OF ARTICLE 12 OF THE DTAA IN THIS REGARD, IT IS SINE QUA NON TO ASCERTAIN THE TRUE NATURE OF SERVICES RENDERED BY THE ASSESSEE. THE ASSESSEE PROVIDED SERVICES TO SAPL UNDER AN AGREEMENT DATED 01-04-2002, WHICH IS STATED TO BE PREVALENT FOR THE YEAR UNDER CONSIDERATION AS WELL. THIS FACTUAL ASSERTION BY THE LD. AR HAS NOT BEEN DENIED BY THE LD. DEPARTMENTAL REPRESE NTATIVE. THUS, IT IS EVIDENT THAT THE NATURE OF SERVICES RENDERED BY TH E ASSESSEE TO SAPL DURING THE YEAR UNDER CONSIDERATION IS SIM ILAR TO THAT PROVIDED IN THE EARLIER YEARS INCLUDING THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE MATTER AS TO TAXABILITY OR OTHERWISE OF SUCH A SUM CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2016-17. VIDE ORDER DA TED 25-11- 2020, THE TRIBUNAL IN ITA NO.1310/PUN/2019 HAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM SAPL IS NOT CHARGEAB LE TO TAX UNDER ARTICLE 12 OF THE DTAA EVEN THOUGH THE SAME IS IN THE NATURE OF FTS COVERED U/S.9(1)(VI) OF THE ACT. TO BUTTRESS ITS VIEW, THE TRIBUNAL TOOK INTO CONSIDERATION ITS ORDERS FOR THE EARLIER ASSESSMENT YEARS 2009-10 AND 2012-13 HOLDING SIMILARLY. AS THE AUTHORITIES BELOW HAVE RELIED ON THEIR RESPECTIVE VIEWS TAKEN IN THE ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 6 ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2016-17, WHICH HAS BEEN OVERTURNED BY THE TRIBUNAL, RESPECTFULLY FOLLOWING THE PRECEDENT, WE HOLD THAT THE AMOUNT OF RS.31.29 CRORE REC EIVED BY THE ASSESSEE FROM SAPL IS NOT CHARGEABLE TO TAX WITHIN THE MEANING OF ARTICLE 12 OF THE DTAA. 7. IN ADDITION, THE ASSESSEE ALSO RECEIVED IT SUPPORT SER VICES FEE FROM WALTER TOOLS INDIA PVT. LTD.; SECO TOOLS INDIA PT. LTD.; AN D DORMER TOOLS INDIA PVT. LTD. AMOUNTING TO RS.3.00 CRORES, RS.34.17 LAKHS AND RS.28.60 LAKHS RESPECTIVELY. THE AO HELD SUCH AMOUNT TO BE CHARGEABLE TO TAX UNDER ARTICLE 12 OF THE DTAA BECAUSE THE ASSESSEE COULD NOT PROVIDE THE CORRECT NATURE OF SERVICES. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOING THROUGH THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE CA ME UP FOR CONSIDERATION BEFORE THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. RELEVANT DISCUSSION HAS BEEN MADE IN PARA NOS. 5 AND 6 WHEREIN THE MATTER HAS BEEN RESTORED TO THE FILE OF AO FOR FRESH DETERMINATION OF THE ISSUE IN ACCORDANCE WITH THE DIRECTION GIVEN BY THE TRIBUNAL FOR PRECEDING YEARS. INSOFA R AS THE FACTUAL SCENARIO FOR THE YEAR UNDER CONSIDERATION IS CONCER NED, BOTH ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 7 THE SIDES FAIRLY AGREED THAT THE SAME IS IDENTICAL TO THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, 2016-17. RESPE CTFULLY FOLLOWING THE PRECEDENT, WE SET-ASIDE THE IMPUGNED ORDER O N THIS SCORE AND REMIT THE MATTER TO THE FILE OF AO FOR A FRESH DETERMINATION OF THE NATURE OF SERVICES OFFERED BY THE AS SESSEE TO WALTER TOOLS INDIA PVT. LTD.; SECO TOOLS INDIA PVT. LTD.; AND DORMER TOOLS INDIA PVT. LTD. IN THE TERMS AS GIVEN IN THE OR DERS FOR THE EARLIER YEARS AND THEREAFTER DETERMINE ITS TAXABILITY OR OTHER WISE IN LAW AFTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST APRIL, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE P RESIDENT PUNE; DATED : 01 ST APRIL, 2021 SATISH ITA NO.17/PUN/2021 SANDVIK IT SERVICES AB 8 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. THE PR.CIT-5, PUNE , , C / DR C, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 01-04-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 01-04-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *