ITAT Mumbai Rules Fabrication Charges Not Taxable as FTS Under India–Singapore Treaty

The “I” Bench of the Income Tax Appellate Tribunal, Mumbai, in Owens Corning (Singapore) Pte. Ltd. (AY 2023–24), held that fabrication charges of ₹21.96 crore received from its Indian associate are not taxable in India as Fees for Technical Services (FTS).

Fabrication Charges Do Not Qualify as FTS

The Assessing Officer treated fabrication charges received from Owens Corning India Pvt. Ltd. as FTS under section 9(1)(vii) of the Income-tax Act and Article 12 of the India–Singapore DTAA. The Revenue argued that the services were ancillary and subsidiary to the enjoyment of know-how and patents relating to specialized glass fibre manufacturing.

The assessee contended that:

1. No royalty was received under Article 12(3), making Article 12(4)(a) inapplicable.
2. The services did not “make available” technical knowledge under Article 12(4)(b).
3. No technical plan or design was transferred under Article 12(4)(c).
4. It had no Permanent Establishment in India.

The Tribunal noted that identical issues had been consistently decided in the assessee’s favour in earlier assessment years. It reaffirmed that refurbishing or fabrication activities did not involve transfer of technology or satisfy treaty conditions for FTS.

Earlier Decisions Followed; Addition Deleted

The Tribunal observed that there was no change in facts compared to earlier years where fabrication charges were held non-taxable. It rejected the Revenue’s reliance on Article 9 (Associated Enterprises), clarifying that transfer pricing provisions cannot rewrite treaty conditions. Respectfully following prior coordinate bench rulings, the Tribunal deleted the addition of ₹21.96 crore. As the main ground was allowed, issues relating to tax rate and interest under section 234B were treated as academic or consequential. The assessee’s appeal was allowed in full.