Receipt of fabrication charges from Associate Enterprise outside the purview of FTS

Owens Corning Inc. Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that fabrication charges received from Associate Enterprise doesn’t fall under the purview of fees for technical services (FTS) and accordingly not taxable in India.

Facts- The assessee company is incorporated in Singapore and a group concern of Owens Corning Group of Companies, a leading manufacturer of glass. The assessee is engaged in the business of manufacturer and sale of glass fibers in India.

AO found that there are receipts on account of fabrication charges of Rs. 15,75,67,856/- from its Indian Associate Enterprises namely OCIPL as non-taxable. The assessee has claimed the income as exempted as the assessee has neither any Permanent Establishment (“PE”) in India as per Article 5 of India-Singapore Treaty nor any business connection in India. The Assessing Officer (AO) found in the earlier years, the income was treated as FTS and was taxed.

AO was not satisfied with the contentions of assessee and treated assessee’s receipts as FTS as per Article-12(4)(a) of the DTAA between India and Singapore. Consequently taxed the same u/s. 9(1)(vii) of the I.T. Act read with Article-12(4)(a) of the DTAA between India and Singapore and made addition of Rs.15,75,67,856/- and passed order u/s 143(3)r.w.s 144C of the Act dated 23.03.2022. Subsequently, against the draft assessment order passed by the AO, the assessee has filed objections in Form No .35A with the DRP. Whereas the DRP considered the findings of the AO, the DTAA between India and Singapore, objections and earlier years decisions and has rejected the contentions of the assessee and passed order u/s 144C(5) of the Act dated 28.11.2022. Subsequently, the AO has assessed the total income at Rs.15,75,67,860/-and passed the final assessment order u/s 143(3) r.w.s 144C(13) of the Act dated 21.12.2022. Aggrieved by the order of AO, the assessee has filed appeal before the Hon’ble Tribunal.

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