Gemological Institute International Vs DCIT (ITAT Mumbai)
The appeal before the ITAT Mumbai arose from the final assessment order dated 24 December 2024 passed under sections 143(3), 144C(13), and 254 of the Income-tax Act. The assessee, a tax resident of the United States engaged in providing gem trading, training, technical and allied services, challenged the application of a 15% tax rate under Article 12 of the India–USA Double Taxation Avoidance Agreement (DTAA), the levy of education cess, and the levy of interest under section 234B.
During the original assessment, the Assessing Officer (AO) had also treated reimbursement of travel costs amounting to ₹10,61,365 as Fees for Technical Services (FTS), holding that the expenditure was intrinsically connected with the rendering of technical services. The assessee contended that the amount represented pure reimbursement of expenses and was not taxable under either the Income-tax Act or the India–USA DTAA. The Tribunal, following its decisions in the assessee’s own earlier assessment years, had previously deleted this addition.
With respect to the tax rate applicable to FTS, the assessee had computed tax at 10% under section 115A(1)(b) of the Income-tax Act, considering it more beneficial than the 15% rate under the DTAA. The AO rejected this claim on the assumption that section 115A prescribed a higher rate and consequently applied the 15% treaty rate. The Dispute Resolution Panel (DRP) held that the benefit of section 115A(1)(b) was unavailable because the assessee had failed to establish that its agreement with the Indian concern had been approved by the Central Government, as contemplated by the provision.
