DCIT Vs Roop Automotives Ltd. (ITAT Delhi)
Routine Segregation ≠ Technical Service — ITAT Delhi Upholds Deletion of ₹4.81 Cr FTS Disallowance
Revenue challenged deletion of disallowances aggregating to ₹4,81,03,713 (segregation charges) and ₹21,74,568 (PE-related TDS issue under India–Poland DTAA). After condoning a 50-day delay, ITAT examined the nature of “segregation/rework” carried out abroad.
CIT(A) had treated the payments as non-technical, hence not FTS u/s 9(1)(vii). Revenue argued that invoices contained terms like sorting, rework, coordination, administrative cost, suggesting technical expertise.
However, ITAT reviewed the detailed step-wise description of processes such as sorting, segregation, deburring, rust removal, metal-chip removal, threading corrections (pages 3–5) and held that these activities are standardized, mechanical, routine repair operations performed manually or via basic automated equipment, without creating or transferring any technical know-how.
Tribunal observed that:
- No specialized technical skill or scientific process is involved;
- Specifications of automotive parts cannot be altered during these activities;
- These are ordinary rework processes, commonly outsourced abroad for logistical convenience;
- AO mis-characterised the activities due to incorrect factual appreciation.
Accordingly, ITAT upheld CIT(A)’s conclusion that segregation charges are not FTS, no TDS obligation arises, and consequently s.40(a)(i) disallowance is unsustainable. The Revenue’s appeal was dismissed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
