In the absence of a specific 'Fee for Technical Services' (FTS) clause in a DTAA, receipts from services rendered in the normal course of business are taxable as business profits under the 'Business Profits' Article (Article 7) and not as residuary income under the 'Other Income' Article (Article 22).

ORDER

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the assessment order dated 28.11.2024, passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’).

Facts of the case in brief as emanating from records are: The assessee is a tax resident of Thailand. The assessee acts as regional service centre of the Denso Group for Asia and Oceania undertaking business administration, material engineering services, design and develop services, testing and technical services of automotive components for the Group. The assessee is stated to have no PE in India. During the impugned assessment year, the assessee received a sum of Rs.13,54,32,392/- from its Indian Group Companies on account of management fee and application cost. The consideration recieved by the assessee for rendering the services was held to be Fee for Technical Services (FTS) u/s. 9(1)(vii) of the Act. The Assessing Officer (AO) held that in absence of FTS Clause in the treaty, the income would fall under Article 22(3). Whereas, the case of the assessee is that in the absence of FTS Clause in the treaty, income would fall under Article 7 as income from business, as the services are rendered in the normal course of business.

Shri Vishal Kalra, appearing on behalf of the assessee at the outset submits that is not pressing ground no. 2 of appeal assailing validity of assessment order on the ground of limitation. He further submitted that the assessee in present appeal has assailed the action of AO in taxing receipts amounting to Rs.14,91,92,253/- as FTS under the provisions of section 9(1)(vii) of the Act and invoking the provisions of Article 22(3) of India-Thailand DTAA. He pointed that similar issue arose in assessee’s own case in the preceding assessment year i.e. AY 2020-21. In ITA No. 1985/Del/2023, the Tribunal vide order dated 27.06.2024 following the order of Co ordinate Bench in assessee’s Group Company, Denso (Thailand) Co. Ltd. vs. ACIT, 163 taxmann.com 257 (Delhi-Trib) held that where DTAA does not provide for taxability of FTS separately, any such amount received cannot be taxed under residuary Article 22 of DTAA. The ld. Counsel further submitted that though during relevant period the total transactions carried out by the assessee was aggregating to Rs.13,54,32,392/-, the AO in an arbitrary manner has made addition of Rs. 14,91,92,253/- referring to Insight Data.

Per contra, Shri Nikhil Kumar Govila representing the department defended the assessment order and prayed for dismissing appeal of the assessee. However, the ld. DR fairly submitted that the similar issue has been considered by the Tribunal in assessee’s own case in the preceding assessment year.

Both sides heard, orders of the authorities below examined. The solitary issue for consideration before us is whether the receipts FTS amounting to Rs. 14,91,92,253/- for providing services to Group Companies in India in observance of specific FTS Clause in DTAA is taxable under Article 22(3) of India-Thailand DTAA. Similar issue was considered by the Coordinate Bench in asseessee’s own case in AY 2020-21 in ITA No. 1985/Del/2023 (supra), the Tribunal held as under:-

“4. Heard and perused the records. The grounds raised in this appeal have been considered by this Bench in the case of a group company of the assessee Denso (Thailand) Co. Ltd. and vide ITA No.1986/Del/2023, order dated 31.05.2024, the grounds stand allowed as there is no difference in facts except for the amounts involved. Considering the grounds to be squarely covered, we reproduce herein below the relevant part of the order dated 31.05.2024 (supra):-

4.1 As with regard to remaining grounds composite arguments were submitted by both sides primarily reas