Chowringhee Residency Pvt Ltd Vs ITO (International Taxation) (ITAT Kolkata)
In Chowringhee Residency Pvt. Ltd. Vs ITO (International Taxation), the Kolkata ITAT considered whether payments made by the assessee to a UAE-based company for technical consultancy services were liable to tax deduction at source (TDS) in India and whether the assessee could be treated as an assessee in default under Sections 201(1) and 201(1A) of the Income Tax Act.
The assessee, engaged in real estate development, was developing the residential project “The 42” in Kolkata. For this project, it entered into a Technical Consultancy Agreement with Arabian Construction Co. WLL (ACCWLL), UAE. Under the agreement, ACCWLL provided advisory and consultative services, including review of construction drawings, construction techniques, scaffolding and staging designs, safety and security measures, and quality review of construction activities. The assessee maintained that the services were purely advisory and did not involve transfer of technical know-how, processes, designs, or methodologies. During the relevant financial year, remittances were made to ACCWLL after filing Forms 15CA and 15CB, treating the payments as business profits under Article 7 of the India-UAE DTAA. ACCWLL was a UAE tax resident and had no Permanent Establishment (PE) in India.
During scrutiny proceedings, the Assessing Officer examined the agreement, invoices, tax residency certificate, Forms 15CA and 15CB, and other documents. The AO concluded that the payments constituted Fees for Technical Services (FTS) under Section 9(1)(vii) of the Income Tax Act and were taxable in India. According to the AO, the assessee was required to deduct tax at source under Section 195 at 20%. Since no tax had been deducted, the assessee was treated as an assessee in default under Section 201(1), and interest under Section 201(1A) was also levied, resulting in a total demand of ₹35.57 lakh. The CIT(A) subsequently confirmed the demand through an ex-parte order.
