Case Law Details
Raj Ajudhianath Kaul Vs ITO (ITAT Mumbai)
Conclusion: Receipts earned by a German resident individual from rendering managerial, consultancy and business development services outside India, based on personal expertise and independent professional skill, constituted independent professional services under Article 14 of the India–Germany DTAA and were not taxable in India in the absence of a fixed base or the prescribed period of stay in India. Such receipts could not be taxed as Fees for Technical Services under Article 12 merely because the services involved consultancy or commercial advice.
Held: Assessee, an individual and tax resident of Germany, rendered managerial, consultancy and business development services to Indian companies, including M/s Sajjan India Ltd. and M/s PI Industries Ltd., for identifying business opportunities, expanding commercial operations and establishing business connections in Germany. The services were rendered entirely outside India and the remuneration was received in Germany. Tax was, however, deducted at source under section 195 of the Income-tax Act by the Indian companies. AO treated the receipts as Fees for Technical Services (FTS) taxable in India under Article 12 of the India–Germany Double Taxation Avoidance Agreement (DTAA) and made additions accordingly. Assessee contended that the services rendered were in the nature of independent professional services falling under Article 14 of the India–Germany DTAA, as they were performed in an individual capacity using personal expertise, specialised knowledge and business experience. It was further argued that Article 14, being a specific provision governing independent professional services, prevailed over the general provision relating to FTS under Article 12. Reliance was placed on judicial precedents interpreting the expression “professional services” broadly to include activities predominantly involving intellectual skill and specialised expertise. Revenue contended that the services constituted consultancy and technical services chargeable as FTS under Article 12 and were therefore liable to tax in India. It was held that the expression “professional services” under Article 14 was not confined to traditional professions but extends to services rendered by an individual employing specialised knowledge, intellectual skill, advanced education and personal expertise. Consultancy and business development services aimed at procuring business opportunities, analysing markets and facilitating commercial expansion in Germany constituted independent professional services within the meaning of Article 14. Tribunal observed that the mere fact that the services involved business advice, market analysis or commercial inputs would not convert them into Fees for Technical Services. Where the services were rendered personally by an individual using specialised knowledge and independent skill, Article 14, being a specific treaty provision, override the general provisions of Article 12. Consequently, such receipts cannot be re-characterised as FTS merely because they contain an advisory element. Since the assessee was admittedly a tax resident of Germany, had no fixed base in India, and did not satisfy the threshold of physical presence prescribed under Article 14, the receipts were taxable exclusively in Germany and not in India.
Present appeals are filed by assessee arising out of final assessment order dated 29/12/2024 and 20/01/2026 for A.Y. 2018-19 and 2019-20 and following grounds of appeal:-
AY 2018-19
“1. The Ld. Assessing Officer ought to have considered that on receipt from M/ s P1 Industries of Rs. 1,84,96,014/- TDS has been deducted by the remitter at 10% treating the remittance taxable as FTS and no further tax liability arises on said remittance in India as per the direction o e Hon’ DRP panel 2 in its order u/s 144c(5), hence LD AO erred in taxing said income at normal rate of tax instead of as applicable to FTS.
2. The Ld. Assessing Officer and LD DRP erred in law & on facts in treating receipt from M/ s Sajjan India Ltd. of Rs.98,87,500/ – as FTS without appreciating the fact that the remittance was for market support services provided by a resident of Germany who has offered to tax in Germany and no income accrued or arisen in India not being FTS but towards sale commission.
2.1 The Ld. Assessing Officer ought to have considered the direction given under DRP order by Hon’ DRP panel 2 in which it was directed to treat the tax liability of the appellant being a Non-Resident as per Article 12(2) of India Germany DAA at 10%. On remittance received from M/ s Sajjan India Ltd. of Rs. 98,87,500/
3. The AO is statutorily bound to follow DRP directions as per Section 144C (10) of the Income Tax Act.
4. Applicant craves your honour’s leave to add, alter or amend any grounds of objection at the time of hearing or before.”
AY 2019-20
“1. Ld. Assessing Officer and Ld. DRP failed to appreciate that notice u/s 148 being dated 10-05-23 being after lapse of 3 years from end of assessment year and alleged escaped income being Rs 19,26,245/- ie. below Rs.50,00,000/ – notice issued is beyond time permitted u/s 149 of the Act.
1.1 Notice u/s 148A(b)being issued based on information on Insight Portal’ without any enquiry and application of mind whether income reported is escaped income liable to be taxed in India.
2. Ld. Assessing Officer and Ld. DRP failed to appreciate that notice u/s 148 is bad in law as Sanction u/s 151 is granted by Pr.CIT Delhi, while assesse is assessed regularly at Mumbai, Order u/s 148A(d) being passed by AO 2(1)(2) Mumbai is bad in law, Pr. CIT Delhi not having jurisdiction over the assesse and sanction granted without proper application of mind.
3. Ld. The Ld. Assessing Officer and Ld. DRP erred in law & on facts in treating receipt from M/ s.Sajjan India Ltd. of Rs.19,26,245/ – as FTS without appreciating the fact that the remittance was for market support services provided by a resident of Germany who has offered to tax in Germany and no income accrued or arisen in India not being FTS but towards sale commission.
4. AO and DRP erred in not considering that none of the receipts remitted from India including receipts offered to tax in return of income, even if FTS, not taxable in India, Appellant being a non-resident Individual of Germany entitled to benefit of Article 14 of India- German DTAA.
5. Ld. Assessing Officer and Ld. DRP erred in denying the treaty benefit bet een India and Germany as no TRC was filed, inspite of the fact that TRC was filled vide submission dated 4th May 2023.
6. Ld. Assessing Officer and Ld. DRP failed to appreciate the fact that income received of Rs. 1,85,39,809/ – from PIL and Rs.36,27,800/ – from M/ s. Tagros Chemicals India Ltd. pertains to A.Y.2017-18 and TDS as per FTS has been deducted by both parties and as the assessee being a non resident no further tax was payable in India. Both the receipts not pertaining to A. Y.2019-20 wrongly taxed in the A. Y.2019-20.
7. Ld. AO erred in passing an order u/s 147r.w.s.144C(13) dated 20.01.2026 without considering that notice u/s 148 being issued on 10.05.2023 draft assessment issued on 25.03.2025, final assessment ought to be completed by 31.03.2025 under the provisions of Sec. 153, as time not being extended for 144C proceedings.
8. Ld. AO erred in imposing interest u/s 234B of Rs.69,20,144/ – while computing tax liability without considering the fact that if remittances made from India are liable to be taxed in India, such remittance be subject to deduction of tax at source u/s 195 and as such the Appellant be not liable for imposition of interest u/s 234B of the Act.
9. Ld. Without prejudice that no income is liable to be taxed in India Ld.AO erred in taxing certain Income at rate higher to 10% applicable to FTS.
10. Applicant craves your honour’s leave to add, alter or amend any grounds of objection at the time of hearing or before.”
Since the issues involved in both the appeals are identical, they were heard together and are being disposed of by way of this common order. For the sake of convenience, A.Y. 2018-19 is taken as the lead case. The decision rendered therein shall apply mutatis mutandis to A.Y. 2019-20.
2. Brief facts of the case are as under:-
2.1. The assessee is a non-resident individual and a tax resident of Germany. The assessee filed his return of income on 19/06/2018 declaring a total income of Z1,98,940/-. Subsequently, based on certain information received through the Insight Portal, the assessment was reopened. The information available with the Ld.AO revealed that M/s. Sajjan India Ltd. had remitted an amount of 298,87,500/- to the assessee towards consultancy services without deduction of tax at source. It was noted that proceedings under section 201(1) and 201(1A) of the Income-tax Act, 1961 were initiated in the case of M/s.Sajjan In. is Ltd., wherein the Ld.AO held that the services rendered by the assessee were in the nature of Fees for Technical Services (FTS) and, therefore, tax was liable to be deducted at source before making the remittance to the assessee.
2.2. Based on the aforesaid information, the assessment of the assessee was reopened on the ground that income chargeable to tax had escaped assessment, as the assessee had received the aforesaid remittance from M/s.Sajjan India Ltd. The Ld.AO further noted that the assessee had also received an amount of Z 1 ,84,96,014/ – from M/ s.PI Industries Ltd. towards consultancy services rendered.
2.3. During the course of assessment proceedings, the assessee furnished a computation of income wherein the receipts received from M/s. PI Industries Ltd. were disclosed as consultancy fees. However, it was submitted that the said receipts were not taxable in India in view of the beneficial provisions of the India-Germany Double Taxation Avoidance Agreement (DTAA). It was, however, observed that the assessee had not included the receipts received from M/s. Sajjan India Ltd. in the computation of income furnished before the Ld.AO.
2.4. Accordingly, a show-cause notice was issued to the assessee calling upon him to explain as to why the receipts received from M/s. Sajjan India Ltd. had not been offered to tax in India.
2.5. In response, the assessee submitted that the receipts received from M/s.Sajjan India Ltd. were towards business support services and marketing services rendered by him in Germany. It was submitted that the said amount was received by the assessee outside India, i.e., in Germany, and the same had been duly offered to tax in assessee’s German tax return as business income.
2.6. The assessee further contended that the services rendered by him were not in the nature of technical services, as he was not a technical professional and the services provided did not involve any technical knowledge, expertise or specialised skill. It was submitted that the assessee was not rendering any managerial, technical or consultancy services and, therefore, the receipts could not be characterised as Fees for Technical Services (FTS) under the provisions of the Act or the India-Germany DTAA.
2.7. With regard to the receipts received from M/s.PI Industries Ltd., the assessee submitted that the income was earned and received in Germany and, therefore, in terms of the provisions of the India-Germany DTAA, the same was not taxable in India in the absence of a Permanent Establishment (PE) in India. It was further submitted that, M/s. PI Industries Ltd., had already deducted tax at source under section 195 of the Act on the said payments.
2.8. Assessee thus submitted as under:-
“a) The nature of the service rendered by the assessee is not fee for technical services (FTS) in nature as per Income-tax Act, 1961 as well as provisions of the DAA between India and Germany.
b) Even the nature is remittances are FTS even than the same is not chargeable to tax as per provisions of section 9(1)(vii)(b) of the Act.
c) The assessee being resident of Germany and based on source of income has offered the above remittances to tax Germany.
d) Even M/ s.P.I Industries Limited has deducted TDS, as per provisions of section 195 of the Act, the same is not taxable in India.
e) As per Article 14 of the DTAA between India and Germany the above remittances are taxable in Germany only.”
2.9. After considering the submissions of assessee, the Ld.AO he d as under:-
“5.7 The above contentions of the assessee are not acceptable due to following mentioned reasons.
a) The assessee highly qualified and his academic and his expertise are very sound in his own filed of knowledge and experience. The terms and nature of service rendered by the assessee to the above two entities is technical in nature. Here it is pertinent understand the term FTS
The term FTS as used in the Act as well as in the Article means payments of any kind to any person, other than to an employee of the person making the payments, in consideration of for any service of technical, managerial or consultancy nature, including the provisions of services of technical or other personnel. The terms ‘managerial’ “technical’ and ‘consultancy’ needs to considered with an exhaustive meaning attributable to them. It is essential that there should be an application of mind and independent decision making by the service provider. A technical service means a service requiring expertise in technology or scientific knowledge/ experience. Further, ‘Consultancy services’ involves giving of an advice/ opinion/ recommendations, or counselling, or advisory services by a professional.
On perusal of facts and nature of service provided by the assessee to the above two entities, the nature of services qualifies the test as technical consultancy’ by a professional or an expert of his filed.
b) The source of income is in India only and therefore, the receipts received by the assessee is chargeable to tax in India as per provisions of section 9(1) (vii) of the Act as well as per Article 12 of the DTAA between India and Germany. Thus, contention of the assessee that fees are received in respect of services utilised in a business carried on outside India or for the purposes of making or earning any income from any source outside India is not correct. In this case there is no dispute that that the business or profession which is carried on by the assessee is based in India and not outside India. The next exception which has been envisaged by the legislature is that the fees for technical services payable by resident of India is not to be treated as deemed Income if the same is payable for the purpose of making or earning any Income from any source outside India. Here, the income which is earned by the assessee is definitely from a source in India and merely because an assessee has provided services outside India, it cannot be said the income is earned form a source outside India as the source definitely remains within the territorial jurisdiction of India.
The Hon’ble Delhi High Court in the appeal number ITA No. 55/2012 & ITA No.57/ 2012 has examined source of export income in the case of CIT vs Havells India Ltd relevant part of the decision dated 21.05.2012 is reproduced as under:
“…………..
12. The question as to what is a source of income has been dealt with in some authoritative pronouncements. The Judicial Committee in Rhodesia Metals Ltd. v. Commissioner of Income Tcvc, (1941) 9ITR (Suppl.) 45 observed that a “source” means not a legal concept but one which a practical man would regard as a real source of income. This observation was adopted by Malik, J. in his separate but concurring judgment in the case of Rani Amrit Kaur v. CIT, (1946) 14 ITR 561, a decision of the ull Bench of the Allahabad High Court. A source of income was described by R. S. Pathak, J. (as he then was) in the following words in Seth Shiv Prasad v. CIT, (1972) 84 ITR 15 (All.) at page 18: –
“A source of income, therefore, may be described as the spring or fount from which a clearly defined channel of income flows. It is that which by its nature and incidents constitutes a distinct and separate origin of income, capable of consideration as such in isolation from other sources of income, and which by the manner of dealing adopted by the assessee can be treated so.”
The observations of the Judicial Committee (supra) as to what is a source of income have been approved by the Supreme Court in CIT v. Lady Kanchanbai, (1970) 77 ITR 123. The location or situs of a source of income is another aspect. The third aspect is the accrual of the income. Though it is true, as held by Kania, C.J., speaking for a Constitution Bench of the Supreme Court in CIT v. Ahmedbhai Umarbhai, (1950) 18 TTR472 (SC) at page 479, that the place where the source of income is located may not necessarily be the place where the income also accrues, that question is not material in the present case because herein we are concerned only with the question as to the location of the source. The real question is whether the export sales proceeds received from goods manufactured and exported from India constitute a source inside or outside India. To decide the same we have to take a pragmatic and a practical view and not approach the question from a theoretical perspective.
13. Section 9(i)(vii)(b) contemplates a source located outside India. It is difficult to conceptualise the place/ situs of the person who make payment for the export sales as the source located outside India from which assessee earned profits. The export contracts obviously are concluded in India and the assessee’s products are sent outside India under such contracts. The manufacturing activity is located in India. The source of income is created at the moment when the export contracts are concluded in India. Thereafter the goods are exported in pursuance of the contract and the export proceeds are sent by the importer and are received in India. The importer of the assessee’s products is no doubt situated outside India, but he cannot be regarded as a source of income. The receipt of the sale proceeds emanate from him from outside India. He is, therefore, only the source of the monies received. The income component of the monies or the export receipts is located or situated only in India. We are making a distinction between the source of the income and the source of the receipt of the monies. In order to fall within the second exception provided in Section 9(1) (vii)(b) of the Act, the source of the income, and not the receipt, should be situated outside India. That condition is not satisfied in the present case…
… Be that as it may, as we have already pointed out, since the source of income from the export sales cannot be said to be located or situated outside India, the case of the assessee cannot be brought under the second exception provided in the Section.”
(Emphasis supplied)
Therefore, the remittances received by the assessee is taxable as per provisions of section 9(1)(vii) r.w.s. 5 of the IT Act, 1961.
c) The assessee himself aware that payment received from M s. PI Industries Ltd of Rs. 1,84,96,014/ – duly brought to tax by deducting TDS upon the same. The nature of service rendered by the assessee to M/ s. PI Industries Ltd is taxable, than the remittance for the same nature of services rendered to M/ s. Sajjan India Ltd is also taxable.
d) The facts of case laws relied by the assessee duly perused and found that facts in the case of the assessee for AY under consideration are different from facts discussed in the relied case laws.
e) On perusal of Form 15CA for remittances made to the assessee, it is noticed that the M/ s Sajjan India Ltd filed Part ‘D’ of the Form 15CA and not claimed benefit of provisions of the DTAA. Now the assessee relied on article 14 of the DTAA between India and Germany and claimed the benefit of the same. Here it is pertinent of mention relevant part of the Article 12 and 14 of the DTAA between India and Germany
“…. ARTICLE 12 ROYALTIES AND FEES FOR TECHNICAL SERVICES
1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but f the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or the fees for technical services.
3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
4. The term ‘fees for technical services” as used in this Article means payments of any amount in consideration for the services of managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but does not include payments for services mentioned in Article 15 of this Agreement.
5. The provisions of paragraphs 1 and 2 shall not apply f the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
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ARTICLE 14 INDEPENDENT PERSONAL SERVICES
1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State :
(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities, in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State ; or
(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 120 days in the relevant fiscal year; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.
2. The term “professional services” includes independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants…..”
As the assessee himself admitted that services rendered by the assessee was ‘Business consultancy’ and the ‘Business Consultancy’ is not comes under Article 14 of the DTAA. Furthermore, as per Article 12(5) of the DTAA between India and Germany the FTS receipts with fixed base or permanent establishment than only the same shall be brought to provisions of Article 7 or Article 14 of the DTAA between India and Germany. As the assessee himself admits that there was no fixed base available to the assessee in India and services rendered by the assessee from outside India, therefore the same remittances shall taxed in India only. Hence there is no recourse available to the assessee under Article 7 or Article 14 of the DTAA between India and Germany.
6. Against the proposed addition, the assessee filed objections before the DRP. The Hon’ble DRP during the course of proceedings after considering the submission and disposed off the objection of the assessee by confirming the addition made by the AO totalling to Rs. 2,83,83,514/ -.
7. In light of the above discussion the receipts received from M/ s. PI Industries Ltd and M/ s. Sajjan India Ltd. respectively of Rs. 1,84,96,014/ – and Rs. 98,87,500/ – totaling to Rs. 2,83,83,514/ – is added back to the total income of the assessee for the A. Y. 2018-19. Penalty proceeding u/ s. 270A initiated separately for under-reporting of income as per provisions of section 270A(2) of the Act.”
On receipt of the draft assessment order dated 28/03/2024, the assessee preferred objections before DRP.
3. Before the DRP, the assessee reiterated the submissions made before the Ld.AO and submitted that the Ld.AO had erred in treating the receipts as Fees for Technical Services (FTS) taxable u/s 9(1)(vii) of the Act in the hands of the assessee.
3.1. The DRP, after considering the submissions of the assessee, observed and held as under:
“6.2. Discussion and Directions of the Panel:
6.2.1 In this case, the AO has proposed to make an addition of Rs. 1,84,96,014/ – by treating the remittances received by the assessee from PI Industries Limited as fees for technical services (FTS) taxable u/s 9(1)(vii) r.w.s 5 of the Act.
6.2.2 From the perusal of the agreement dated 25.10.2014 it is seen that PI Industries Ltd had taken the services of the assessee as an “Advisor” for formulation an implementation of the company’s growth strategy; to oversee the company’s foray into new product discovery; and to establish and oversee the company’s representative office in Dusseldorf, Germany for coordinating new product initiatives and leverage for other commercial possibilities to expand the business of the company. PI Industries Limited had also fixed a specified sum as remuneration for these services rendered by the assessee. PI Industries Ltd had also done TDS at the rate of 10% by treating the remittance as FTS.
6.2.3 However, the Panel notes that the applicant assessee has still chosen not to disclose this income which is taxable u/s 9(1)(vii) r.w.s 5 of the Act.
6.2.4 The only argument of the applicant assessee is that the entire tax liability had already been discharged on account of TDS done by PI Industries Ltd and that there was no further tax liability to be discharged. The assessee has accepted that the nature of the remittance was of FTS and hence taxable u/s 9(1)(vii) r.w.s 5 of the Act. If the logic of the applicant assessee was to be accepted, then any income on which TDS has been done would not form part of any computation of income at all. Thus, the argument of the assessee is devoid of any merit.
6.2.5 The Panel notes that in view of the facts of the case, the AO has correctly proposed adding this amount of Rs. 1,84,96,014/ – to the total income of the assessee. The tax will be charged as per Article 12(2) of the India-Germany DTAA. The applicant assessee was bound, as per the provisions of the law, to report and disclose this income which was taxable in India and which has not been so done by the applicant assessee. The action of the AO is accordingly upheld and tax will be charged as per Article 12(2) of the India-Germany DTAA. The objection of the applicant assessee is dismissed. 7. Ground of Objection No. 2:
7.1 Issues:
2. The Ld. Assessing Officer erred in law & on facts in treating receipt from M/ s Sajjan India Ltd. of Rs. 98,87,500/- as FTS without appreciating the fact that the remittance was for market support services provided by a resident of Germany who has offered to tax in Germany and no income accrued or arisen in India not being FTS but towards sale commission.
7.2 Discussion and Directions of the Panel:
7.2.1 In this case, the AO has proposed to make an addition of Rs. 98,87,500/- by treating the remittances received by the assessee from Sajjan India Limited as fees for technical services (FTS) taxable u/s 9(1)(vii) r. w.s 5 of the Act.
7.2.2 From the perusal of the agreement dated 20.02.2015 it is seen that Sajjan India Ltd had taken the services of the assessee as a “Marketing Advisor” in the area of Marketing Strategy and Operation including facilitating in interaction and articulating of marketing goals, advocacy of Sajjan India with potential customers and advising to support export activities. Sajjan India Limited had also fixed a specified sum as remuneration for these services rendered by the assessee. It is clearly mentioned in the agreement that the payments are subject to the necessary applicable taxes as per the Indian Income Tax Act along with the DTAA with Germany.
7.2.3 The AO has held that the services being provided by the assessee were in the nature of “consultancy” and involved giving of advice/ opinion/ recommendation or counselling or advisory services. The agreement dated 20.02.2015 categorises the assessee as a “Marketing Advisor”.
7.2.4 The applicant assessee has on the other hand pleaded that the remittanc treated as “export commission”.
7.2.5 The Panel notes that the plea of the applicant assessee to treat the remittances as “export commission” is fallacious. The agreement between Sajjan India Ltd and the assessee has been entered by treating the later as a “Marketing Advisor” and not as a “Commission Agent”. Moreover, the assessee is being given a fixed remuneration, which is not linked to the export sales at all. The agreement does not talk of “export commission” at all. Moreover, the assessee, as a Marketing Advisor, is rendering a host of services apart from services related to export activities. Thus, the argument of the assessee is devoid of merits.
7.2.6 The Panel further notes that the applicant is trying to take refuge under Article 7 of the India-Germany DTAA which deals with the taxation of business profits. This Article is in any case applicable to business enterprises and the assessee being an individual does not fall in that category.
7.2.7 The Panel also notes that the applicant assessee has argued that it be given the benefit of Article 14 of the India-Germany DTAA pertaining to taxation of Independent Personal Services. In this regard, it is seen that the services rendered by the applicant assessee do not fall in the category of professional services like independent scientific, literary, artistic or educational services or independent activities of physicians, lawyers, engineers, architects etc mentioned therein or other independent activities of similar character. The services being provided by the assessee were in the nature of “consultancy”. Thus, the benefit of Article 14 has been rightly denied by the AO.
7.2.8 In view of the facts and circumstances of the case, the Panel is of the considered view that the services being provided by the assessee to Sajjan India Ltd were in the nature of “consultancy” and taxable in India as fees for technical services (F7’S) taxable u/s 9(1)(vii) r.w.s 5 of the Act. The AO has correctly proposed adding this amount of Rs. 98,87,500/ – to the total income of the assessee. The tax will be charged as per Article 12(2) of the India-Germany DTAA. The applicant assessee was bound, as per the provisions of the law, to report and disclose this income which was taxable in India and which has not been so done by the applicant assessee. The action of the AO is accordingly upheld and tax will be charged as per Article 12(2) of the India-Germany DTAA. The objection of the applicant assessee is dismissed.”
On receipt of the DRP directions, Ld.AO passed the impugned order making additions in the hands of assessee amounting to Rs.2,83,83,514/-.
Aggrieved by the final assessment order, assessee is in appeal before this Tribunal.
4. The Ld.AR submitted that the assessee has raised the following additional grounds vide application dated 04/04/2025 before this Tribunal:-
‘1. Ld. AO and DRP erred in not considering that receipts remitted from India, even if FTS, not taxable in India, Appellant being a non-resident Individual of Germany entitled to benefit of Article 14 of India- German DTAA.
2. Ld. AO erred in passing an order u/s 147r.w.s.144C(13) dated 29.12.2024 without considering that notice u/s 148 being issued on 28.04.2022 draft assessment issued on 28.03.2024, final assessment ought to be completed by 31.03.2024 under the provisions of Sec. 153, as time not being extended for 144C proceedings.
3. Ld. AO erred in imposing interest u/s 234B of Rs.80,03,448/- the computing tax liability without considering the fact that if remittances made from India are liable to be taxed in India, such remittance be subject to deduction of tax at source u/s 195 and as such the Appellant be not liable for imposition of interest u/s 234B of the Act.”
4.1. We have considered the application dated 04/04/2025 filed by the assessee seeking admission of the additional grounds reproduced hereinabove.
4.1.1. It is observed that the additional grounds raised by the assessee are purely legal in nature and go to the root of the assessment. The adjudication of these grounds does not require any fresh investigation into facts and can be decided on the basis of material already available on record. The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT reported in 229 ITR 383 (SC) has held that a pure question of law arising from facts already on record can be raised at any stage of the proceedings.
4.1.2. Considering the nature of the additional grounds and respectfully following the ratio laid down by the Hon’ble Apex Court, we admit the additional grounds for adjudication and proceed to decide the same on merits.
Accordingly, application for admission of additional ground vide application dated 04/04/2025 stands admitted.
At the outset, the Ld.AR submitted that, Additional Ground No.2 is not pressed by the assessee pursuant to the amendment brought in by Finance Act, 2025.
Accordingly, this Ground stands dismissed as infructuous.
5. Ld.AR submitted that additional Ground No.1 is a specific ground and has to be considered along with Ground Nos.1 86 2 raised by assessee in Form 36. Accordingly, these Grounds are being considered cumulatively.
5.1. The Ld.AR submitted that, these grounds raised by the assessee pertain to the taxability and characterization of receipts received from Indian entities under the provisions of the India-Germany DTAA. The assessee contends that, being a tax resident of Germany, the receipts earned from services rendered outside India are governed by Article 14 relating to Independent Personal Services and cannot be taxed in India in the absence of a fixed base/PE in India.
5.1.1. The assessee has also challenged the action of the Assessing Officer in taxing the receipts of Z1,84,96,014/- received from M/s. PI Industries Ltd. at normal rates, despite tax having been deducted at source under section 195 and the DRP directions regarding taxation as per the DTAA. Further, the assessee disputes the treatment of receipts of 298,87,500/- received from M/s. Sajjan India Ltd. as Fees for Technical Services, contending that the amount was received towards market support and business development services rendered outside India and was not in the nature of technical or consultancy services.
5.1.2. Alternatively, it is contended that even if the receipts are held taxable as FTS, the tax liability should be restricted to the rate prescribed under Article 12 of the India-Germany DTAA.
5.2. Briefly, the Ld. AR submitted that the receipts received from M/s. Sajjan India Ltd. were towards business support and marketing services rendered by the assessee in Germany. It was submitted that the services were performed outside India, consideration was received in Germany, and the same was offered to tax in the assessee’s German tax return as business income.
5.2.1. The Ld.AR further submitted that the services rendered by the assessee did not involve any technical expertise, specialised knowledge or consultancy/advisory functions and, therefore, the receipts could not be characterised as Fees for Technical Services either under the Act or under the India-Germany DTAA.
5.2.2. With regard to the receipts from M/s. PI Industries Ltd., the Ld. AR submitted that the income was earned and received in Germany and, in the absence of any Permanent Establishment (PE) in India, the same was not taxable in India under the provisions of the India-Germany DTAA. It was further submitted that tax had already been deducted at source by M/s. PI Industries Ltd. under section 195 of the Act on such payments.
5.3. The Ld.AR submitted that the services rendered by the assessee do not fall within the ambit of “Fees for Technical Services” either under section 9(1)(vii) of the Income-tax Act, 1961 or under Article 12 of the India-Germany DTAA. It was submitted that the assessee merely provided market support and business development services to the Indian entities for facilitating business opportunities and supporting export activities. Such services, according to the Ld.AR, are in the nature of commercial and market support services and cannot be regarded as technical or consultancy services.
5.3.1. The Ld.AR further submitted that the authorities below erred in characterising the services as consultancy services merely based on the terminology used in the agreement. It was contended that the taxability of the receipts has to be determined having regard to the actual nature and substance of the services rendered and not merely on the basis of the nomenclature adopted by the parties.
5.3.2. It was submitted that the services performed by the assessee did not involve the application of any specialised technical knowledge, technical expertise, or transfer of technical skills. The assessee had also not provided any managerial, advisory or consultancy services of the nature contemplated under Article 12 of the India-Germany DTAA. Accordingly, the receipts could not be treated as Fees for Technical Services either under the domestic law or under the provisions of the applicable DTAA.
4.3.3. Reliance was placed by the Ld. AR on the decision of the Hon’ble Bombay High Court in the case of Shell India Markets Pvt. Ltd. v. DCIT reported in 463 ITR 222, wherein the Hon’ble Court examined the scope of Article relating to Fees for Technical Services (FTS). The services considered by the Hon’ble Court included management support services, development and provision of support and business tools, marketing support services, information technology advice and services, and other business support services.
4.3.4. He submitted that Hon’ble Bombay High Court, after examining the nature of the services, observed that the services rendered were essentially in the nature of managerial services and did not involve any element of technical character. Hon’ble Court observed that a harmonious reading of the relevant Article establishes that income can be characterised as Fees for Technical Services only where the services availed are technical or consultancy in nature. It was further held that the expression “technical services” refers to services which require expertise in technology, whereas “consultancy services” would mean services involving an element of advice or consultation.
4.3.5. Placing reliance on the aforesaid decision, the Ld. AR submitted that the services rendered by the assessee, being in the nature of market support and business development services, do not satisfy the requirements of FTS under either the Act or the India-Germany DTAA.
4.3.6. The Ld.AR further submitted that while rendering the aforesaid decision, the Hon’ble Bombay High Court considered the judgment of the Hon’ble Madras High Court in the case of Skycell Communications Ltd. v. DCIT reported in 251 ITR 53, wherein it was observed that Fees for Technical Services would ordinarily refer to services involving the application of specialised knowledge in the field of applied and industrial science.
4.3.7. It was submitted that Hon’ble Bombay High Court, after considering the nature of services rendered in the said case, concluded that the services did not partake the character of technical services and, therefore, the provisions relating to Fees for Technical Services were not attracted.
4.3.8. Placing reliance on the aforesaid judicial precedents, the Ld.AR submitted that the market support and business development services rendered by the assessee stand on an even stronger footing and cannot, by any stretch of imagination, be characterised as technical services. The services rendered neither involved the application of technical expertise nor required the assessee to provide any specialised consultancy or professional advice. Accordingly, it was submitted that the receipts receive• •y the assessee could not be brought to tax as Fees for Technical Services either under section 9(1)(vii) of the Act or under Article 12 of the India-Germany DTAA.
4.3.9. The Ld.AR relied on the following decisions to support this contention: –
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- Hon’ble Supreme Court in the case of Vedanta Ltd. v. ACIT reported in 448 ITR 732.
- Hon’ble Bombay High Court in the case of CEAT International S.A. v. CIT reported in 237 ITR 859.
- Hon’ble Delhi High Court in the case of Springs Nature Customer Services Centre GmbH v. DCIT reported in 458 ITR 728.
- Hon’ble Delhi High Court in the case of Maharani Enterprises v. ACIT reported in 457 ITR 15.
- Hon’ble Delhi High Court in the case of CIT v. Grup ISM Pvt. Ltd. reported in 378 ITR 205.
- Hon’ble Madras High Court in the case of CIT v. Faizan Shoes Pvt. Ltd. reported in 367 ITR 155.
- Hon’ble Delhi Bench of the Tribunal in the case of Bhartiya International Ltd. v. DCIT reported in 227 7711897.
4.4. The Ld. AR submitted that in respect of the remittance received from M/s. PI Industries Ltd. amounting to Z1,84,96,014/, tax already stood deducted at source under section 195 of the Act. It was contended that the authorities below failed to appreciate this aspect and proceeded to bring the said amount to tax in the hands of the assessee.
4.4.1. The Ld.AR submitted that the assessee is an individual and a tax resident of Germany who stayed in India only for 35 days during the relevant previous year. It was thus submitted that admittedly, the assessee did not have any fixed base or Permanent Establishment (PE) in India for rendering professional services. Accordingly, the assessee was entitled to the benefit of Article 14 of the India-Germany DTAA dealing with Independent Personal Services.
4.4.2. Referring to Article 14 of the India-Germany DTAA, the Ld.AR submitted that income derived by an individual resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in the State of residence unless (i) the individual has a fixed base regularly available in the other Contracting State, or (ii) his stay in the other State exceeds 120 days during the relevant fiscal year. It was submitted that neither of the aforesaid conditions was satisfied in the present case, as the assessee had neither a fixed base in India nor had his stay exceeded the prescribed threshold.
4.4.3. The Ld.AR further submitted that the assessee furnished valid Tax Residency Certificate (TRC) evidencing his residence in Germany. Accordingly, the income earned from M/s. PI Industries Ltd. and M/s. Sajjan India Ltd. was taxable only in Germany and could not be subjected to tax in India under the provisions of the India-Germany DTAA.
4.5. The Ld.AR placed reliance on the decision of Hon’ble Bangalore Bench of the Tribunal in the case of WiFi Networks P. Ltd. v. ACIT reported in 72 ITR (Trib.) 01. It was submitted that the Tribunal, while examining Article 14 relating to Independent Personal Services under the India-Uganda DTAA, which was pan materia with Article 14 of the India-Germany DTAA, considered services involving handling of operations, coordination with Indian teams, troubleshooting, testing, upgrading and customer support. It was submitted that, despite the Revenue’s contention that such receipts were taxable under Article 12 relating to Fees for Technical Services, Hon’ble Tribunal held that the nature of services being technical in character would not, by itself, exclude the applicability of Article 14. It was held that professional services may also involve technical attributes, and merely because services possess technical elements, the same cannot automatically be classified as Fees for Technical Services.
4.5.1. The Ld. AR submitted that the Tribunal further held that Articles 12 and 14 may, in certain circumstances, appear to overlap; however, Article 14 is a specific provision governing income derived by an individual from professional services, whereas Article 12 is a general provision dealing with Fees for Technical Services. Applying the principle that a specific provision overrides a general provision, Hon’ble Tribunal held that Article 14 would prevail wherever the income is derived by an individual from independent professional services.
4.5.2. The Ld.AR submitted that, even assuming, without admitting, that the services rendered by the assessee could be regarded as technical services, the provisions of Article 14, being a specific provision applicable to individuals, would override Article 12 of the DTAA. Since the assessee had no fixed base in India and his stay in India was only for 35 days during the relevant previous year, the receipts were taxable only in Germany.
4.6. The Ld.AR also relied on the decision of the Coordinate Bench of the Tribunal in the case of Maharashtra State Electricity Board v. DCIT reported in (2004) 83 TTJ 325, wherein the Tribunal examined the interplay between the provisions relating to Independent Personal Services and Fees for Technical Services under the India-UK DTAA. It was submitted that the Tribunal held that where income falls within the specific Article relating to independent personal services, the same cannot be taxed under the Article relating to Fees for Technical Services. He submitted that this Tribunal, while considering the issue, observed that the expression “professional services” appearing in the relevant Article of the DTAA has not been specifically defined either under the DTAA or in the OECD Model Convention. He also submitted that this Tribunal, however, referred to the decision of Hon’ble Kolkata Bench of the Tribunal in the case of Graphite India Ltd. v. DCIT reported in (2003) 78 771J 418, wherein the scope and meaning of the expression “professional services” was examined by observing as under:
“The definition of “professional services, which are termed as “independent personal services’ in the phraseology employed in tax treaties, is, however, not defined in tax treaties or even official commentaries on UN and OECD Model Conventions. The meaning of this term is illustrated by some examples of typical liberal professions, and this enumeration of professions has only an explanatory character. The Law Lexicon’ edited by Justice Y.V. Chandrachud (1997 Edn.) defines “profession, inter alia, as involving’ the idea of an occupation requiring either purely intellectual skill or if any manual skill, as in painting and sculpture or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale of arrangements for the production or sale of commodities’. This definition, barring the words “as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale or arrangements for the production or sale of commodities” is incidentally the same as assigned by Scrutton I.J. in IRC vs. Maxse (1919) 1 KB 647 referred to in LB Curzon’s Law directory. Referring to Hon’ble Bombay High Court’s judgment in the case of Sakharam Narayan Kherdekar vs. City of Nagpur Corpn. AIT 1964 Bom. 200, at p. 210, the Law Lexicon further states that “an activity to be profession must be one carried on by an individual by his personal skill, intelligence and dependent on individual characteristics’. Black’s Law Dictionary (5th Edn.) defines profession as “a vocation or occupation requiring special, usually advanced, education and skill e.g., in law and medicine’ and observes that “the labour and skill involved in a profession is predominantly men or intellectual, rather than physical or manual’. The school of thought thus emerging from these deliberations is that, broadly speaking, a profession will imply any vocation carried on by an individual, or group of individuals, requiring predominantly intellectual skills, dependent on individual characteristics of the person(s) pursuing that vocation, requiring specialised and advanced education or expertise.
…… We find that the thrust of consultancy arrangement is that Mr.Rusinko is to keep the assessee abreast of matters concerning technology upgradation and development of new products in the field of carbon and graphite, besides sharing with the assessee fruits of his labour in the area of his related research and development. This work essentially involves predominantly intellectual skills, dependent on individual characteristics of Mr. Rusinko, and presupposes Mr. Rusinko’s specialised and advanced education or expertise in related fields”.
4.6.1. Placing reliance on the aforesaid decisions, the Ld.AR contended that the receipts earned by the assessee were covered by Article 14 of the India-Germany DTAA and, therefore, were not taxable in India.
4.7. Per contra, the Ld.DR vehemently opposed the submissions advanced on behalf of the assessee. It was submitted that the services rendered by the assessee were in the nature of managerial and consultancy services and, therefore, squarely fall within the ambit of Fees for Technical Services (FTS). The Ld. DR placed reliance on Article 12(5) of the India-Germany DTAA and contended that the consideration received by the assessee is taxable in India as FTS.
4.7.1. The Ld. DR further submitted that the provisions of section 9(1)(vii) read with section 5 of the Act are attracted in the present case, as the income has accrued and arisen in India from services rendered to Indian entities. It was contended that the assessee is a highly qualified professional possessing substantial experience and expertise in the relevant field and that the services rendered by im involved the application of specialised knowledge and skill.
4.7.2. It was submitted that, having regard to the terms of engagement and the actual nature of services rendered by the assessee to M/s. PI Industries Ltd. and M/s. Sajjan India Ltd., the services cannot be regarded as mere market support or business development services. According to the Ld. DR, the services involved providing specialised inputs, advice and assistance to the Indian entities and, therefore, constituted technical consultancy services. Accordingly, the consideration received by the assessee was liable to be characterised as Fees for Technical Services under the provisions of the Act as well as the India-Germany DTAA.
4.7.3. The Ld. DR further submitted that the source of income is situated in India since the payments were made by Indian entities for services availed by them. Therefore, the receipts were chargeable to tax in India under section 9(1)(vii) of the Act.
4.7.4. The Ld. DR also disputed the contention of the assessee that the services were utilised in connection with a business carried on outside India or for earning income from a source outside India. It was submitted that the services rendered by the assessee were directly availed by Indian entities for their business purposes and, therefore, the exceptions provided under section 9(1)(vii) of the Act were not applicable. Accordingly, the Ld. DR supported the action of the Assessing Officer in bringing the receipts to tax in India.
We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.
5. It is an undisputed fact that the assessee is a tax residen of Germany and had rendered marketing support and business development services to M/s. Sajjan India Ltd. for facilitating export sales outside India. It is also an admitted position that the assessee did not have any Permanent Establishment (PE) in India and that his stay in India during the relevant previous year did not exceed 35 days.
5.1. From the nature of activities carried on by M/s. Sajjan India Ltd., it is observed that the company is engaged in the business of manufacturing chemicals and allied products. The assessee was engaged by the said company for identifying prospective customers outside India and facilitating business opportunities for the products manufactured by the company.
5.1.1. In our considered view, there is nothing on record to suggest that the assessee possessed any specialised knowledge relating to the manufacturing process of chemical products undertaken by M/s. Sajjan India Ltd. Further, no material has been brought on record to demonstrate that the assessee rendered any technical advice, provided technical know-how, or offered consultancy in relation to the manufacturing activities of the company.
5.1.2. On the contrary, the material available on record indicates that the assessee was primarily engaged in identifying potential customers, developing business opportunities and supporting the company’s marketing efforts in overseas markets. The services rendered were therefore essentially in the nature of market support and business development services. From the agreement placed at pages 11 to 17 of the paper book, it is observed that the assessee was entitled to receive a lump-sum consideration of Euro 1,00, for undertaking such activities.
5.1.3. In respect of the receipts from M/s. Sajjan India Ltd., it is noted that the role of the assessee was restricted to identifying prospective customers for the products manufactured by the company and facilitating the marketing of such products in overseas markets. The assessee contended that the services were rendered entirely outside India and the corresponding consideration was also received outside India.
5.1.4. It was in the aforesaid factual background that the assessee did not offer the receipts received from M/s. Sajjan India Ltd. to tax in India, contending that the same were not taxable in India in terms of Article 14 of the India-Germany DTAA relating to Independent Personal Services.
5.2. Insofar as M/s. PI Industries Ltd. is concerned, it is observed that the company is engaged in the business of manufacturing agricultural inputs, plant protection products, plant nutrients, agrochemicals, intermediates and other chemical products.
5.2.1. The assessee, on the basis of his professional background, industry experience and business network in Germany, assisted M/s. PI Industries Ltd. in identifying business opportunities and exploring possibilities for expansion in the German market. The assessee provided inputs relating to global developments in the agrochemical sector, market trends, emerging technologies, delivery mechanisms and potential areas of growth. The assessee also assisted the company in identifying strategic alliances, joint ventures and other investment opportunities in line with its business objectives.
5.2.2. For rendering the aforesaid services and related support activities, the assessee received remuneration of Euro 2,50,000. It is the case of the assessee that tax was deducted at source under section 195 of the Act by M/s. PI Industries Ltd. at the rate of 10% on the said payments, notwithstanding that the services were rendered outside India and the consideration was received by the assessee in Germany.
5.3. As noted hereinabove, the expression “professional services” appearing in Article 14 of the India-Germany DTAA has not been specifically defined under the DTAA. Therefore, the interpretation placed on the scope of such expression by the Coordinate Bench in the case of Maharashtra State Electricity Board v. DCIT (supra), relied by the Ld.AR, assumes relevance while adjudicating the issue before us. At the cost of repetition, the relevant observations reproduced and relied upon in the said decision are extracted hereunder:
“The definition of “professional services, which are termed as “independent personal services’ in the phraseology employed in tax treaties, is, however, not defined in tax treaties or even official commentaries on UN and OECD Model Conventions. The meaning of this term is illustrated by some examples of typical liberal professions, and this enumeration of professions has only an explanatory character. The Law Lexicon’ edited by Justice Y.V. Chandrachud (1997 Edn.) defines “profession, inter alia, as involving’ the idea of an occupation requiring either purely intellectual skill or if any manual skill, as in painting and sculpture or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale of arrangements for the production or sale of commodities’. This definition, barring the words “as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale or arrangements for the production or sale of commodities” is incidentally the same as assigned by Scrutton I.J. in IRC vs. Maxse (1919) 1 KB 647 referred to in LB Curzon’s Law directory. Referring to Hon’ble Bombay High Court’s judgment in the case of Sakharam Narayan Kherdekar vs. City of Nagpur Corpn. AIT 1964 Bom. 200, at p. 210, the Law Lexicon further states that “an activity to be profession must be one carried on by an individual by his personal skill, intelligence and dependent on individual characteristics’. Black’s Law Dictionary (5th Edn.) defines profession as “a vocation or occupation requiring special, usually advanced, education and skill e.g., in law and medicine’ and observes that “the labour and skill involved in a profession is predominantly mental or intellectual, rather than physical or manual’. The school of thought thus emerging from these deliberations is that, broadly speaking, a profession 11 imply any vocation carried on by an individual, or group of individuals, requiring predominantly intellectual skills, dependent on individual characteristics of the person(s) pursuing that vocation, requiring specialised and advanced education or expertise.
We find that the thrust of consultancy arrangement is that Mr. Rusinko is to keep the assessee abreast of matters concerning technology upgradation and development of new products in the field of carbon and graphite, besides sharing with the assessee fruits of his labour in the area of his related research and development. This work essentially involves predominantly intellectual skills, dependent on individual characteristics of Mr. Rusinko, and presupposes Mr. Rusinko’s specialised and advanced education or expertise in related fields”.
5.4. On the basis of the above discussion, it is clear that the expression “professional services” would encompass services rendered in the course of a profession or business carried on by an individual or a group of individuals, requiring predominantly intellectual skills and dependent upon the individual characteristics, specialized knowledge, advanced education, training, or expertise of the person rendering such services.
5.5. Applying the aforesaid principles to the facts of the present case, we note that the assessee has been rendering managerial and consultancy services to the two Indian companies for procuring business opportunities for the companies outside India, particularly in Germany, and for facilitating the establishment and expansion of their business connections in Germany. In our considered view, activities carried on by the assessee in the present facts fall within the scope of “professional services or other independent activities of a similar character” contemplated under Article 14 of the India-Germany DTAA. The mere fact that the services involved business development, market analysis or commercial inputs would not take the same outside the ambit of professional services, as long as the services are rendered through the individual’s own specialised knowledge and independent skill.
5.6. Further, merely because the services may involve an element of advice or specialised understanding, the same cannot automatically be classified as Fees for Technical Services under Article 12 of the DTAA. Article 14 is a specific provision governing income derived by an individual from independent professional activities, whereas Article 12 is a general provision dealing with FTS. Therefore, where the services rendered by an individual fall within Article 14 and the conditions prescribed therein are satisfied, the income cannot be brought to tax under Article 12 merely by giving a different characterisation to the services.
5.7. In view of the foregoing discussion, we hold that the receipts received by the assessee from M/s. Sajjan India Ltd. and M/s. PI Industries Ltd. are in the nature of income derived from independent professional services rendered by the assessee in his individual capacity, based on his personal expertise, market experience and business knowledge and were not in the nature of technical services involving the provision of technical know-how or consultancy of the nature contemplated under Article 12 of the India-Germany DTAA.
5.8. Since the assessee is admittedly a tax resident of Germany, did not have any fixed base regularly available in India and his stay in India during the relevant year did not exceed the prescribed threshold, the receipts derived from such professional services are taxable only in Germany in terms of Article 14 of the India-Germany DTAA. We, therefore, direct the Assessing Officer to delete the addition made on account of receipts from M/s. Sajjan India Ltd. and M/s. PI Industries Ltd.
Accordingly, additional Ground No.1 is a specific ground and has to be considered along with Ground Nos.1 & 2 raised by assessee stands allowed.
ITA No. 1916/De1/2024 – A.Y. 2019-20
6. At the outset, it is observed that the facts and circumstances giving rise to the additions in the year under consideration are substantially similar and identical to those considered by us for the preceding assessment year.
6.1. The Ld. AR submitted that Ground Nos. 1, 2 and 7 are in respect of the legal challenge raised against the validity of the notice issued u/s 148 of the Act and the consequent assessment order on the ground of limitation. However, it was fairly submitted that these grounds becomes infructuous in view of the amendments brought about by the Finance Act, 2025. Accordingly, Ground Nos.1, 2 and 7 raised by the assessee stands dismissed as infructuous.
7. Ground Nos. 3, 4, 5 and 6 relate to the merits of the additions made by the Revenue. We note that, for the year under consideration, payments received from PI Industries Limited and M/s. Tagros Chemicals India Ltd. have been subjected to tax deduction at source in India. It has been contended that such payments pertain to Assessment Year 2017-18 and have erroneously been brought to tax in the year under consideration. The Ld. AO is directed to verify this factual aspect on the basis of the TDS certificates and other supporting evidences furnished by the assessee and grant appropriate relief in accordance with law.
7.1. In any event, having regard to our findings and conclusions recorded hereinabove, the receipts in question cannot be held to be taxable in India in terms of Article 14 of the India-Germany DTAA.
7.2. Insofar as the payment received from Sajjan India Limited is concerned, the same shall be governed by and considered in light of our observations recorded in the preceding paragraphs. Accordingly, applying the principle of mutatis mutandis, we direct the Ld.AO to delete the additions made in the hands of the assessee for the year under consideration.
Accordingly, grounds 3-6 raised by the assessee for stands allowed.
In the result, the appeals filed by the assessee for Assessment Years 2018-19 & 2019-20 stands partly allowed.
Order pronounced in the open court on 19/06/2026.
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