Faurecia Systems D'echappement, Pune V. Assistant Commissioner of Income Tax (International Taxation), Circle-1, Pune, Pune

ITA 28/PUN/2023

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The case revolves around the taxability of Rs.21,63,92,641 claimed by Faurecia Systemes D'echappement, a French company, as exempt income from IT Support fees and Management services provided to its Indian subsidiary. The Assessing Officer (AO) had treated this amount as taxable under the heads of Royalty and FTS, charging it at 10%. The Dispute Resolution Panel (DRP) upheld the AO's decision, which led to the final assessment order. However, the Tribunal, referencing previous rulings in favor of the assessee for similar services in earlier assessment years, overturned the DRP's decision and ruled that the income was not chargeable to tax.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137844 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-04-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 05-01-2023
• Other Referred Cases: Faurecia Systemes D'echappement vs. ACIT (International Taxation), Circle-1, Pune
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, ‘C’ PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.28/PUN/2023 नधा रण वष / Assessment Year : 2020-21 Faurecia Systemes D’echappement, Plot No.T-187, Pimpri Industrial Area (B.G. Block), Behind Bhosari Police Station, Bhosari, Pune 411 026 Maharashtra PAN : AABCF7193F Vs. ACIT (International Taxation), Circle-1, Pune Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP : This appeal by the assessee is directed against the final assessment order dated 11-11-2022 passed by the Assessing Officer (AO) u/s.143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2020-21. 2. The only issued pressed by the ld. AR is against the taxability of Rs.21,63,92,641/-, being, the amount claimed by the assessee as not chargeable to tax but held by the AO as ‘Royalty’ and ‘Fees for Assessee by Shri Siddhesh Chaugule Revenue by Shri Shivraj Morey, CIT-DR Date of hearing 10-04-2023 Date of pronouncement 10-04-2023 ITA No.28/PUN/2023 Faurecia Systemes D’echappement 2 Technical Services’ (‘FTS’) chargeable to tax @10%. 3. Succinctly, the facts of the case are that, the assessee, a tax resident of France, is engaged in designing and building dashboards, door panels, sound proofing, floor coverings and insulation installations and other moulded plastic parts for passenger car interiors. It filed the return declaring total income of Rs.43.84 crore and exempt income of Rs.21,63,92,641/-. The exempt income was in respect of ‘IT Support fees’ and ‘Management services’ provided to its Indian entity. The AO proposed to tax such amount as chargeable to tax as Royalty and also FTS. The assessee contended that the Dispute Resolution Panel (DRP) for the A.Yrs. 2013-14 and 2014-15 has ruled in favour of the assessee on the issue of taxability of such an issue. The assessee further contented that the Tribunal, in its own case for the A.Yrs. 2015-16 and 2016-17, has held that the income from IT Support fees and Management services is not taxable as FTS as per the provisions of India-France Double Taxation Avoidance Agreement (DTAA) or Royalty under the Act/India-France DTAA. Not convinced, the AO included such amount in the total income. The DRP upheld the action of the AO, which led to the eventual passing of the final assessment order dated 11-11-2022 holding the amount of Rs.21.63 crore as chargeable to tax as Royalty and FTS. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. ITA No.28/PUN/2023 Faurecia Systemes D’echappement 3 4. We have heard the rival submissions and perused the relevant material on record. It is seen that the assessee, a tax resident of France, entered into agreement with its Associated Enterprise on 03-11-2011. IT Support services were rendered pursuant to it. This agreement of 2011 continued to prevail during the interregnum including the assessment year under consideration. The issue of taxability of such IT Support services etc. came up for consideration before the Tribunal in the assessee’s own case for the A.Yrs. 2015-16 and 2016-17. Vide order dated 28-02-2020, the Tribunal in ITA Nos. 2005 & 2006/PUN/2019 has determined the issue in favour of the assessee. It is worthwhile to mention that the assessee raised objections before the DRP against the draft order for the A.Yrs. 2013- 14 and 2014-15 challenging the taxability of IT Support services etc. The DRP, vide its direction dated 29-12-2016 for the A.Y. 2013-14 and dated 30-05-2017 for the A.Y. 2014-15, held such amount of IT Support services etc. as not chargeable to tax. The instant DRP deviated from its earlier rulings and chose to take an inconsistent stand for the year under consideration ignoring the fact that the Tribunal had also decided such issue in favour of the assessee for the two consecutive assessment years. In view of the overwhelming legal position in favour of the assessee, more specifically, when the agreement under which the IT Support services etc. were rendered by ITA No.28/PUN/2023 Faurecia Systemes D’echappement 4 the assessee to its Indian entity during the year continued to remain the same as was so in the above referred assessment years, respectfully following the precedent for the A.Yrs. 2015-16 and 2016- 17, we overturn the assessment order and direct to delete the inclusion of Rs.21,63,92,641/- in the total income of the assessee. 5. In the result, the appeal is allowed. Order pronounced in the Open Court on 10 th April, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 10 th April, 2023 सतीश आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. थ / The respondent 3. The Pr.CIT concerned 4. DR, ITAT, ‘C’ Bench, Pune 5. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No.28/PUN/2023 Faurecia Systemes D’echappement 5 Date 1. Draft dictated on 10-04-2023 Sr.PS 2. Draft placed before author 10-04-2023 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. *