ITAT Mumbai Remands India–Germany Treaty Claim in Limited Scrutiny Case

The “I” Bench of the Income Tax Appellate Tribunal, Mumbai, in the case of Bobst Bielefeld GmbH (AYs 2017–18 and 2018–19), set aside the matter to the CIT(A) to examine the assessee’s claim for treaty benefit under the India–Germany DTAA.

Limited Scrutiny and Treaty Benefit Dispute

The German company had offered its Indian-sourced income under the head “Profits and Gains from Business or Profession” and computed tax accordingly. It also claimed relief under section 91 to effectively arrive at a 10% tax rate, consistent with Article 12 of the India–Germany tax treaty. The case was selected for limited scrutiny to examine the claim of double taxation relief under sections 90/91. During assessment, the assessee explained that it had no Permanent Establishment (PE) in India and was eligible for the beneficial 10% tax rate on Fees for Technical Services (FTS) under Article 12. However, the Assessing Officer taxed the income at 40% under the Act and denied the treaty benefit. The CIT(A) upheld the assessment, holding that under limited scrutiny, the AO could not examine other issues.

Tribunal: Legitimate Claim Must Be Examined

The Tribunal noted that:

1. Relief under section 91 was not legally available to a non-resident with Indian-source income.
2. The assessee’s explanation regarding notional claim under section 91 and its reliance on treaty benefit required proper examination.
3. Even in limited scrutiny, an Assessing Officer is not barred from considering claims raised by the assessee.

Since no specific finding was recorded on the applicability of Article 12 of the India–Germany DTAA or the existence of a PE, the Tribunal set aside the matter to the CIT(A) for fresh adjudication.

Both appeals were allowed for statistical purposes.