Standby Maintenance Charges cannot be assessed as Fees for Technical Services but as Business Income

Reliance Globalcom Limited Vs DCIT (ITAT Mumbai)

Conclusion: Standby Maintenance Charges received by  assessee from TCL could not be assessed as FTS and was its “business income‟ that was taxable only to the extent of its reference to the “business connection” in India. Turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to the operations carried out had to be calculated on the basis of apportionment of cable length in India vis-a-vis the worldwide cable length.

Held: Revenue claimed that CIT(A) had erred in concluding that the amount received by assessee from TCL as Standby Maintenance Charges was not in the nature of  “fees for technical services” (FTS) u/s 9(1)(vii). Assessee was aggrieved with the rejection by CIT(A) of its claim that the Standby Maintenance Charges received from TCL only qua the portion thereof which was relatable to the length of cable in Indian territorial waters vis-a-vis the length of cable worldwide was to be taken as the total revenue deemed to accrue or arise in India from which relatable expenses were to be reduced for computing its income accruing or arising in India u/s 9(1)(i). It was held that both the issues were squarely covered by orders passed by the Tribunal in the case of assessee for the preceding years wherein Tribunal had concluded that the Standby Maintenance Charges received by  assessee from TCL could not be assessed as FTS and was its “business income‟ that was taxable only to the extent of its reference to the “business connection” in India. Also, Tribunal observed that turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to the operations carried out had to be calculated on the basis of apportionment of cable length in India vis-a-vis the worldwide cable length.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The captioned cross-appeals/appeal are directed against the respective orders passed by the CIT(A)-58, Mumbai, dated 25.01.2019 and 28.01.2019 for A.Y 2014-15 and A.Y 2015-16, which in turn arises from the respective orders passed by the A.O u/s 143(3) r.w.s 144C(3) of the Income Tax Act, 1961 (for short „Act‟). As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first take up the cross-appeals for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds before us:

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