International Taxation

CA. Hinesh Doshi

M/s Siemens Aktiengesellschaft vs Deputy Commissioner of Income-tax (International Taxation), Mumbai [TS-786-ITAT-2026(MUM)] dated 29th April 2026

Facts:

  • The Assessee is a foreign company incorporated in Germany that entered into an MOU with an Indian group company, Siemens Ltd., to jointly execute a turnkey Train Control & Signaling system project for the Delhi Metro Rail Corporation (DMRC).

  • The MOU and the eventual contract explicitly divided the project scope, assigning separate responsibilities: the Assessee performed offshore equipment supplies and offshore services, whereas Siemens Ltd. undertook all onshore works.

  • Both consortium members raised distinct invoices, independently received separate considerations directly from DMRC, and agreed to cross-indemnify each other for defaults despite holding joint and several liability towards the employer.

  • The AO treated the framework as an indivisible composite contract to tax the offshore supplies, and the DRP dismissed the primary objections; aggrieved, the assessee filed an appeal with the ITAT.

Issue:

  • Whether a consortium formed strictly to execute a turnkey project—characterized by separate scopes of work, distinct invoicing, and individual risk/profit retention—can be treated as an AOP, and whether its offshore supply is taxable in India?

Held:

  • ITAT held that no AOP was constituted because the cumulative prerequisites—such as common management, joint execution, and sharing of profits or losses—were entirely absent, noting that joint and several liability was merely a project safeguard for DMRC.

  • Relying on the Supreme Court ruling in Ishikawajima-Harima Heavy Industries and Clause 1(a) of the Protocol to Article 7 of the India-Germany DTAA, the ITAT confirmed that income from offshore supply of goods is not taxable in India as the property passed outside Indian territory.

M/s Chowringhee Residency Pvt. Ltd. vs ITO (International Taxation), Kolkata [TS-735-ITAT-2026(Kol)] dated 20th May, 2026

Facts:

  • The Assessee, an Indian company engaged in real estate development, entered into a Technical Consultancy Agreement with a UAE-based entity, Arabian Construction Co. WLL (ACCWLL), to provide supervisory and advisory inputs on high-rise construction techniques.

  • During FY 2017-18, the Assessee remitted payments to ACCWLL without deducting tax at source, classifying the remittances as non-taxable “Business Profits” under Article 7 of the India-UAE DTAA, since ACCWLL did not maintain a Permanent Establishment (PE) in India.

  • The Assessing Officer (AO) treated the remittances as “Fees for Technical Services” (FTS) under Section 9(1)(vii) of the Act and declared the Assessee to be an assessee-in-default, raising a tax and interest demand under Sections 201(1) and 201(1A).

  • The Learned CIT(A) passed an ex-parte order confirming the default demand without assessing the core merits of the case; aggrieved, the assessee filed an appeal with the ITAT.

Issue:

  • Whether technical advisory remittances made to a UAE resident can be taxed as FTS under domestic law when the India-UAE DTAA completely lacks a specific FTS article and the services do not transfer any independent capability to the recipient.

Held:

  • The ITAT held that the India-UAE DTAA does not contain a specific article for taxing FTS, and it is a settled legal position that domestic law definitions under Section 9(1)(vii) cannot be imported to expand or rewrite a tax treaty where contracting states made a deliberate choice to omit such an article.

  • Relying on the Madras High Court precedent in Bangkok Glass Industry, the Tribunal ruled that in the absence of an FTS treaty provision, such income must be classified under Article 7 (Business Profits), which escapes Indian taxation if the foreign enterprise has no PE in India.

  • The Tribunal observed that the true test of the “make available” condition is not whether the service provider deployed technical expertise, but whether the recipient is left with an enduring technical capability to replicate or apply the underlying know-how independently in the future.

  • Concluding that ACCWLL’s role was strictly confined to a supervisory and consultative capacity without any transfer of technology, the ITAT deleted the entire demand, confirming that CBDT Circular No. 33 cannot be utilized to mandate tax deduction on an item exempted by the treaty.

  • Thus, ITAT ruled in the favour of the assessee.

M/s. Lloyd’s Register of Shipping (Now Known as Lloyd’s Register Group Ltd.) vs Deputy Commissioner of Income Tax (International Taxation)-3(1)(2), Mumbai [TS-792-ITAT-2026(Mum)] dated 29th May, 2026

Facts:

  • The Assessee, a non-resident parent entity incorporated in the UK, received IT recharge fees from the Indian branch offices of its overseas subsidiaries (LRA and LRQA) for providing intra-group information technology support services.

  • For AYs 2011-12 to 2013-14, the Assessee claimed a concessional tax rate on these IT recharge fees under Section 115A of the Income-tax Act, 1961.

  • The Assessing Officer (AO) and the CIT(A) rejected the Section 115A benefit and taxed the receipts at 40%, on the grounds that the specific inter-company agreement had not received prior formal approval from the Central Government.

  • The Revenue further characterized the IT recharge fees as “Fees for Technical Services” (FTS) under Article 13 of the India-UK DTAA, asserting that the services were ancillary and subsidiary to the enjoyment of an underlying licensed property.Aggrieved, the assessee filed an appeal with the ITAT.

Issue:

  • Whether a non-resident can be denied the concessional tax rate under Section 115A for automatic route transactions lacking separate Central Government approval, and whether routine intra-group IT support recharges qualify as FTS under the India-UK DTAA.

Held:

  • The ITAT held that since the intra-group IT payments did not fall within the restricted or prohibited schedules of the FEMA (Current Account Transactions) Rules, 2000, they were governed by general/automatic approval, which suffices to satisfy the statutory requirements of Section 115A.

  • Relying on the coordinate bench decision in Gemological Institute International, the Tribunal ruled that the benefit of concessional taxation under Section 115A cannot be denied merely for the want of a formal, separate physical approval from the Central Government.

  • The Tribunal observed that the Revenue failed to prove that any technical knowledge, skill, know-how, or process was transmitted to the recipient to equip it to perform the functions independently in the future.

  • Concluding that the embedded “make available” clause under Article 13 of the India-UK DTAA was left unsatisfied, the ITAT deleted the addition, holding that the IT recharge fees are not taxable as FTS in India in the absence of a Permanent Establishment (PE).

  • Thus, ITAT ruled in the favour of the assessee.