ROTO WORLD FZE,AHMEDABAD V. THE DCIT, CPC , BANGLORE

ITA 491/AHD/2020

AI Insights

The case involves Roto World FZE, a foreign company, appealing against the order of the Commissioner of Income Tax (Appeals)-13, Ahmedabad, which upheld the rectification order by the Assessing Officer (AO) taxing the assessee's consultancy income at 40% without granting the benefits of the India-UAE Double Taxation Avoidance Agreement (DTAA). The assessee argued that the income should be taxed as per Article 7 of the DTAA, treating it as business income and not taxable in India as the company had no permanent establishment in the country. The Tribunal's decision focused on the interpretation of the DTAA provisions and the absence of a permanent establishment in India, leading to the conclusion that the income should be taxed only in the UAE, as per Article 22 of the DTAA.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126619 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, DTAA between India and UAE
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; TDS; Rectification of order; Double taxation relief; Permanent establishment; Independent personal service; Grounds of appeal; Dismissed; Commissioner; Commissioner of Income Tax; Statistical purposes; Services; India-UAE
• Section: 143(1); 22

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH BEFORE: DR. BRR KUMAR, VICE PRESIDENT And SHRI T.R SENTHIL KUMAR, JUDICIAL MEMBER Roto World FZE, B-212, Ratnakar Nine Square, Opp. Keshavbaug Party Plot, Vastrapur, Ahmedabad-380015. PAN: AAICR1885P (Appellant) Vs Deputy Commissioner of Income Tax, CPC, Bangalore. (Respondent) Assessee Represented : Shri Vipul Khandhar, AR Revenue Represented : Shri Rignesh Das, Sr.D.R. Date of hearing : 08.04.2025 Date of pronouncement : 23.04.2025 आदेश/ORDER PER : DR. BRR KUMAR, VICE PRESIDENT: This appeal is filed by the Assessee against the appellate order dated 28.08.2020 passed by the Commissioner of Income Tax (Appeals)-13, Ahmedabad, relating to the Assessment Year 2018- 19. 2. The assessee has raised the following grounds of appeal: 1. The Learned CIT(Appeals) failed to appreciate that the kind of adjustment made by the learned AO in rectification order u/s.154 r.w.s. 143(1) is of highly debatable nature and should not have been made at the time of processing of the return. It is submitted that it be so held now and the income returned by the Appellant at Rs. Nil should have been accepted. The learned CIT(Appeals) failed to appreciate this legal contention. ITA No.491/Ahd/2020 Assessment Year 2018-19 I.T.A No. 491/Ahd/2020 A.Y. 2018-19 Page No 2 2.(i) The Learned CIT(Appeals) erred in law and on facts in upholding the order u/s.154 on intimation u/s.143(1) passed by learned AO, CPC taxing consultancy income of the Appellant, who is not having permanent establishment in India, at 40% plus applicable surcharge and education cess instead of granting treaty benefits as claimed under provisions of Article 7 of the India-UAE treaty. It is submitted that it be so held now and applicable benefits under Article 7 of the treaty be granted to the Appellant. 2(ii) The Learned CIT(Appeals) erred in holding that in the order u/s.154 in respect of intimation u/s.143(1), no further relief can be granted to the Appellant in spite of the fact that tax domicile certificate equivalent to tax residency certificate from UAE authorities for the period under consideration was submitted to the learned CIT(Appeals). 3. The Learned CIT(Appeals) failed to appreciate that ultimately the nature of income in the hands of the Appellant, being business income in the form of consultancy income, is governed by the provisions of Article 7 of DTAA between India and UAE and the same should not have been taxed in India. The Learned CIT(Appeals) failed to appreciate that ultimately, it is the substance of the matter that is to be looked into for deciding substantive tax liability of the Appellant and since the Appellant has furnished tax domicile certificate containing all the particulars required under Rule 21AB, the same should have been considered and benefit of Article 7 of the India-UAE treaty should have been granted to the Appellant. 4. Without prejudice to any of the earlier grounds, even if the consultancy income is considered as fees for technical services under the head of other source of income, such income can, at the best, be taxed at 10% as per the rates mentioned in Article 12 of DTAA between India and UAE and not at the rate of 40% as treated by the learned AO. Your Appellant, therefore, submits that in the facts and circumstances of the case, if at all tax is to be levied, it would be at the rate of 10% and not at the rate of 40%. Facts:- 3. The brief facts of the case are that assessee, which is a foreign company and earned consultancy income in India during the year, filed the return of income on 19.12.2018 declaring total income at Rs.16,28,750/- and claimed a refund of Rs.1,62,760/- I.T.A No. 491/Ahd/2020 A.Y. 2018-19 Page No 3 on account of benefits under the DTAA between India & UAE and that the consultancy income earned was claimed as not taxable in India as per Article 7 of DTAA treating the same as business income and taxable in UAE only as the company had no Permanent Establishment (PE) in India. The return of income was processed u/s.143(1) and intimation dated 10.06.2019 has issued by the DCIT, CPC wherein gross total income was considered at Rs.32,57,500/- instead of Rs. 16,28,750/- and tax thereon raised a demand of Rs.8,30,712/. An online rectification application was made by the assessee requesting rectification of the mistakes apparent from the record. It is asserted by the assessee that it was partly rectified vide order u/s.154 made on 01.08.2019 taxing the income of 40% as applicable to foreign company and not granting benefits of DTAA and a demand of Rs.6.20.272/- was raised instead of refund claim of Rs.1,62,760/-. 4. The rectification order dated 01.08.2019 which is computation of income and tax has been attached by the assessee. It is seen from the computation that income from other sources is Rs. 16,28,750/- (same as the return of income) but the tax of Rs.6,51,500/- has been computed thereon under the head tax on \"special income other than Section 115BBE\" whereas as per the return of income there was no tax due thereon and credit of TDS of Rs.1,67,761/-has been allowed as claimed in the return of income. Because of the tax imposed and charging of interest and applicable surcharges and cess, I.T.A No. 491/Ahd/2020 A.Y. 2018-19 Page No 4 Rs.6.20.272/ has been determined as tax payable by the DCIT, СРС, Bangalore. 5. Aggrieved with the said assessment as above, the appeal under consideration has been filed challenging the additions made/treatment given by the Assessing Officer. The Ld. CIT(A) dismissed the appeal of the assessee. 6. Aggrieved by the order of the Ld. CIT(A), the Assessee filed appeal before the Tribunal. 7. Heard both the parties and perused the material available on record. 7.1 The assessee has filed Tax Residency Certificate (TRC) valid from January 2018 to December 2018. It is not in dispute that the assessee earned marking commission during the year. Since the assessee do not have any PE, the Article 7 is not applicable. Article 22 of DTAA reads as under:- Article 22 Other Income “…1. Subject to the provisions of paragraph (2), items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Agreement, shall be taxable only in that Contracting State 2. The provisions of paragraph (1) shall not apply to income, other than income from immovable property as defined in paragraph (2) of Article 6, if the recipient of such income, being a resident of a Contacting State, carries on business in the her Contracting State through a permanent I.T.A No. 491/Ahd/2020 A.Y. 2018-19 Page No 5 establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply…” In view of the facts on record, the assessee is eligible for benefits under Article 22. The Assessing Officer is hereby directed to recompute the tax liability. 8. The appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 23.04.2025 Sd/- Sd/- (T.R SENTHIL KUMAR) (DR.BRR KUMAR) JUDICIAL MEMBER VICE PRESIDENT (True Copy) (True Copy) Ahmedabad : Dated 23.04.2025 आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद "