Is design service is fees for technical service?

 

ncome deemed to accrue or arise in India - fees for technical services - Treating the services provided by the assessee to Reliance Corporation IT Park Limited and the payment received as Fees for Technical Services u/A 12 of India – Singapore DTAA

ITAT DELHI _ GENSLER SINGAPORE PRIVATE LIMITED VERSUS JCIT, CIRCLE : 1 (3) (1) INTERNATIONAL TAX, NEW DELHI. .- I.T.A Nos. 7694/Del/2019
Dated.- August 25, 2023

Facts_ the assessee is a tax resident of Singapore and is in the business of providing design services to customers in the Asia Pacific region. During the assessment year under consideration the assessee has provided the services to its Indian Associated Enterprises – Gensler Design India Pvt. Ltd. This service included designs, technical and consulting services, marketing support services and services related to evaluation of certain project properties. Receipts in lieu of these services have been offered to tax as Fees for Technical Services (FTS) @ 10% in accordance with Article 12 of Indo Singapore DTAA. In the course of assessment the Assessing Officer noticed that the assessee has received Rs. 2,90,89,423/- from Reliance Corporation IT Park Limited (RCITP) and in Form 26AS it is reflected that TDS @ 10% has been deducted by the payer on the said amount. Assessee was asked to explain why the said receipts have not been included in the taxable income. Assessee stated that the income received from RCITP is not taxable as per the Treaty.

HELD THAT:- As could be seen from Virtue of clause 2.9 the assessee who is the principal designer assigns and transfer to RCITP all right title and interest in all deliverables from the moment of creation and the principal designer the assessee grants RCITP a perpetual irrevocable non-exclusive royalty-free fully paid-up right and license to use copy, modify and prepare derivative works of the principal designer intellectual property rights incorporated in the deliverables for the use of the deliverables by the RCITP and its affiliates and third parties engaged by RCITP in connection with the business operations of the RCITP and its affiliates.

This clearly shows that the assessee is making available RCITP all reports, analysis, tests, tables, plans, drawings or other documents in any form including electronic or printed form for the use of RCITP which enables RCITP to apply and use all these deliverables for its business purposes which specifies the conditions of sub clause (b) and (c ) of clause (4) of Article 12 of Indo – Singapore DTAA.

Thus, the payments received by the assessee from RCITP are fees for technical services falls under sub clause (4) of Article 12 of Indo – Singapore DTAA.

Lower authorities have rightly treated the amounts received by the assessee from RCITP as fees for technical services under Article 12 (4) of Indo – Singapore DTAA and was rightly brought to tax at 10%. Decided against assessee.