Alstom (Shared Services) Philippines Inc. Vs DCIT (ITAT Delhi)
The appeals concerned whether consideration received by two non-resident assessees for providing business support and human resources services to their Indian group entities was taxable in India as royalty or otherwise under the applicable Double Taxation Avoidance Agreements (DTAAs). One assessee was a tax resident of the Philippines and the other of Thailand. Both assessment orders had been passed under Sections 147 read with 144C(13) of the Income-tax Act for AY 2018-19. The assessees did not press their challenge to the validity of the reassessment proceedings, and those grounds were dismissed as not pressed.
The Philippine assessee had entered into a Master Service Agreement with its Indian affiliate for providing finance, accounting, procurement, treasury and human resources support services. The Assessing Officer treated the consideration as royalty under Section 9(1)(vi), alleging that drawings, documents, methods and other proprietary information had been furnished to the Indian entity. The assessee denied sharing any such material and contended that the agreement covered only routine administrative and business support services. It further argued that the India-Philippines DTAA did not contain a Fee for Technical Services (FTS) article and, in the absence of a Permanent Establishment (PE) in India, the receipts could only be treated as business profits under Article 7 and were therefore not taxable in India.
