Pre-clinical laboratory services by non-resident to Indian Customers not chargeable to tax in India

Charles River Laboratories Inc Vs ACIT (ITAT Bangalore)

ITAT Bangalore held that pre-clinical laboratory services rendered by the assessee (non-resident) to its customers in India would not be chargeable to tax in India as the technical services rendered by the affiliates do not “make available” technical knowledge, experience, skill, know-how or process while preparing these reports for their, Indian customers/ clients.

Facts- The assessee is a non-resident incorporated under the laws of United States of America (“USA”) on 25.07.1996. It is engaged in rendering pre-clinical laboratory services to enable the determination of a safe dose and assess the potential toxicity of new drugs prior to human clinical trials by way of conducting in vitro and in vivo tests and trials.

For the year under consideration, the assessee received sum of Rs.9,77,31,642/- from its various Indian customers / clients including M/s. Syngene International Ltd. for the services rendered. The Ld.AO noted that the assessee had not offered the income in the return filed, and that, M/s. Syngene International Ltd. also failed to deduct TDS. Accordingly, notice u/s. 148 was issued to assessee on 31.03.2021.

AO was of the opinion that the payment made to assessee was taxable under IT act and also taxable under DTAA as FTS/FIS in the hands of the assessee in India.

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