The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the IT support services rendered by a French Company to an Indian Company would not constitute a fee for technical services to as per section 9(1)(vi) of the Income Tax Act, 1961.
Facts of the case:
The assessee, a French Company and a tax resident in France is engaged in the computerization of systems, office automation and utilization of personal computers. It helps the Indian entity to equip (Software, Hardware, and Networks) and implementation of systems.
During the relevant assessment year, the assessee received income of Rs.7,07,19,334/- from IT support cost (Global Information Support Allocation Charges).
Interpretation of law and Conclusion:
The Assessing Officer raised tax demand on the receipt received from the IT support cost is in the nature of fees for technical services and within the meaning of section 9(1)(vii) of the Act r.w. Article 13 of the DTAA between India and France.
The assessee objected to the above assessment on the basis of the service agreement entered into Faurecia Systems D‟echappement and Faurecia Emissions Control Technologies Center India Private Limited and submitted an identical issue arose between Faurecia Systems D‟escapement and Faurecia Emissions Control Technologies Center India Private Limited which are sister concerns of the assessee.
The assessee also relied on Tribunal order for A.Y. 2011-12 and submitted that the Tribunal held in favour of assessee. On perusal of the said order, the ITAT found that this Tribunal in the case of M/s. Faurecia Automotive Holding discussed the identical issue in detail from para 15 and held that the IT support services rendered by the assessee, which are otherwise technical in nature, do not involve any imparting of information concerning technical, industrial, or commercial knowledge to Faurecia, India.
“Mere rendering of services, cannot be brought within the scope of section 9(1)(vi) of the Act and the receipt thereon under IT support services does not fall within the ambit of section 9(1)(vi) of the Act. Therefore, it clear the IT support services received by the Indian entity from assessee do not involve any imparting of information concerning technical, industrial or commercial knowledge and the receipt cannot be held as fees for technical services.
Therefore, following the same we hold that the receipts received by the assessee from the Indian entity are not a receipt to be taxed under fees for technical services. The final assessment order passed by the AO is set aside and we direct the AO not to tax the receipt under IT support services as taxable in India in the hands of the assessee,”.