CIT Vs Fujitsu Limited (Delhi High Court)
In a significant ruling, the Delhi High Court has upheld the decision of the Income Tax Appellate Tribunal (ITAT), declaring that an arbitral award received by Fujitsu Limited, a Japan-based tax resident, for non-payment of offshore supplies constitutes business income and is therefore not taxable in India under Article 7 of the India-Japan Double Taxation Avoidance Agreement (DTAA). The judgment, delivered on November 14, 2024, by the ITAT in ITA No. 2607/Del/2022 for Assessment Year (AY) 2019-20, was challenged by the Revenue but ultimately dismissed by the High Court.
The case, CIT Vs. Fujitsu Limited (CM APPL. 39441/2025 and ITA 207/2025 & CM APPL. 39440/2025), centered on the taxability of ₹32,97,07,175/- received by Fujitsu Limited through an arbitral award. Fujitsu, engaged in providing information technology support, maintenance, and software licensing services to various group entities including Indian Associated Enterprises (AEs), had classified this amount as ‘income from business’ in its tax return for AY 2019-20.
Background of the Dispute
Fujitsu Limited filed its return of income for AY 2019-20, declaring a total income of ₹27,96,72,140/-, offered to tax at a rate of ten percent. During scrutiny, the Assessing Officer (AO) identified several receipts, including the arbitral award amount. Initially, the AO, in the draft assessment order dated September 30, 2021, assessed the total income at ₹60,93,79,312/-, classifying the arbitral award as business income.
