Castlewick FZE Vs ACIT (ITAT Chennai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Chennai, concerned the assessment year 2018-19 and arose from a final assessment order passed under Sections 143(3) read with 144C(13) of the Income Tax Act, 1961. The assessee, a company incorporated in the UAE, challenged the taxability in India of an amount of ₹90 lakh received from an Indian entity, M/s. Gannon Dunkerley and Company Ltd.
The payment was received for reviewing existing designs and drawings relating to a turnkey water supply distribution project at Jorhat, Assam. The assessee had not filed a return of income under Section 139 for the relevant year, contending that it had no Permanent Establishment (PE) in India and that no income had accrued or arisen in India.
Subsequently, reassessment proceedings were initiated under Section 148 based on proceedings under Section 201 against the payer company for alleged failure to deduct tax at source. In response, the assessee filed a return declaring nil income. During the assessment proceedings, the assessee argued that the India-UAE Double Taxation Avoidance Agreement (DTAA) contained no specific provision dealing with Fees for Technical Services (FTS). It contended that the scope of taxation under the DTAA could not be expanded by importing provisions of the domestic law where the treaty did not recognize FTS as a separate category of income.
