Receipt of architectural design services cannot taxed as FTS or Royalty

DCIT Vs Aedas Pte. Ltd. (ITAT Delhi)

ITAT Delhi held that the payments received by the assessee in view of architectural design services rendered to its clients in India are not chargeable to tax as FTS in terms of Article 12(4) of the India-Singapore DTAA.

Facts- The assessee is a company incorporated under the laws of Singapore and is a tax resident of Singapore. The assessee is engaged in the profession of rendering project specific architectural design services. The architectural designs provided by the assessee are executed in Singapore. These designs are highly technical in nature and require a great degree of technical knowledge and expertise. During the AY 2015-16, the assessee earned revenue amounting to Rs. 10,81,68,728/- from customers in India from rendition of architectural design services.

During the course of assessment proceedings, the assessee was show caused as to why the payment received in lieu of architectural design services should not be taxed as Fees for Technical Services and/or royalty in terms of Article 12 of the Double Taxation Avoidance Agreement between India and Singapore.

Post reply from the assessee, AO proceeded to tax these payments as FTS and alternatively as royalty under the provisions of the Act as well as under Article 12 of the India-Singapore DTAA as well as section 9(1)(vii) of the Act.

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