Background screening receipts doesn’t qualify as Royalty/ FTS hence not taxable

HireRight Ltd Vs ACIT (ITAT Delhi)

ITAT Delhi held that receipts from background screening provided by the assessee to its customers in India cannot be regarded as Royalty or Fees for Technical Services (FTS) under Article 13 of the India-UK DTAA and hence not taxable in India.

Facts- The assessee is a foreign company and a tax resident of UK. The assessee does not have any permanent establishment in India. The assessee provided background screening and investigation services to its customers in India, however, the same was not offered to tax in India by the assessee.

AO show caused the assessee as to why the background screening and investigation services provided by the assessee to its customers in India would not fall within the purview of Article 13 of the India-UK Double Taxation Avoidance Agreement and liable to tax in India and why the payment received by the assessee from Indian entity should not be taxable as Fees for Technical Services.

Consequently, pursuant to the directions of DRP, AO passed the final assessment order u/s. 143(3) r.w. section 144C(13) assessing the income of the assessee at Rs. 12,54,69,976/- and Rs. 8,51,94,915/- respectively being in the nature of royalty/FTS chargeable to tax in India. Being aggrieved, the present appeal is filed.

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