Denso International Asia Co. Ltd. Vs ACIT (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal of a Thailand-based company for Assessment Year 2021-22, holding that fees received from Indian group companies for technical and management services could not be taxed in India under the residual “Other Income” provision contained in Article 22 of the India-Thailand Double Taxation Avoidance Agreement (DTAA). The assessee, a tax resident of Thailand engaged in providing business administration, material engineering, design, development, testing and technical services to entities within the Denso Group across Asia and Oceania, contended that it had no Permanent Establishment (PE) in India. The Assessing Officer had treated the receipts amounting to ₹17.28 crore as Fees for Technical Services (FTS) taxable under Article 22 of the India-Thailand DTAA and Section 9(1)(vii) of the Income-tax Act, 1961, on the ground that the DTAA did not contain a specific FTS article.
The Tribunal noted that the issue had already been decided in favour of the assessee in its own cases for Assessment Years 2020-21 and 2022-23. Referring to those decisions, the Tribunal reiterated that Article 22 is a residuary provision applicable only to items of income not covered by any other article of the DTAA. It observed that where a DTAA does not contain a specific FTS clause, such income may be considered under Article 7 dealing with business profits, provided it forms part of the regular business activities of the enterprise. In such cases, taxation in India would arise only if the non-resident has a PE in India and the income is attributable to that PE.
