PCIT Vs Charles River Laboratories Inc (Karnataka High Court)
Karnataka High Court Dismisses Tax Appeal Citing Low Monetary Limit; FTS Taxability Appeal Dismissed by Karnataka HC on Low Tax Effect; The Karnataka High Court rejected a Revenue appeal concerning the taxability of Fees for Technical Services (FTS) under the India-USA DTAA due to the tax effect being below the ₹2 Crore threshold set by the CBDT’s latest circular.
The Karnataka High Court has dismissed an appeal filed by the Principal Commissioner of Income Tax (PCIT) against an order of the Income Tax Appellate Tribunal (ITAT) concerning the taxability of an income received by Charles River Laboratories Inc. under the India-USA Double Taxation Avoidance Agreement (DTAA).
The Revenue had challenged the ITAT’s conclusion that the services rendered by the US-based firm did not qualify as Fees for Technical Services (FTS), specifically arguing that the ruling failed to appreciate that the “make available” clause—requiring the transfer of technical knowledge or skill to the Indian personnel—was satisfied. The total tax effect involved in the appeal for the assessment year 2013-14 was ₹1,02,67,696.
During the hearing, the respondent’s counsel argued that the appeal was no longer maintainable, citing the CBDT Circular No. 9/2024 dated September 17, 2024, which raised the monetary limit for filing appeals by the Revenue to ₹2,00,00,000. The counsel asserted that this revised limit applies to pending appeals before the High Courts.
