The Income Tax Appellate Tribunal (ITAT), Pune Bench has held that amounts paid by Bekaert Industries Pvt. Ltd. to its Belgian associate N.V. Bekaert SA for use of IT infrastructure facilities are not taxable as royalty under the India–Belgium Double Taxation Avoidance Agreement (DTAA).
The decision, delivered by Dr. Manish Borad (Accountant Member) and Shri Vinay Bhamore (Judicial Member), followed a reference to a Third Member after the two-member bench had differed on the interpretation of the DTAA provisions. The majority opinion ultimately favoured the assessee.
The appellant/assessee, Bekaert Industries, engaged in manufacturing steel tyre cord, hose reinforcement wire, and advanced filtration products, had availed IT support services — including SAP licenses, maintenance, backup, and disaster recovery systems — from its Belgian parent company, N.V. Bekaert SA.
The Indian subsidiary made payments towards the use of the group’s global IT infrastructure. The Assessing Officer had treated these payments as royalty and fees for technical services (FTS) under Section 9(1)(vi) of the Income Tax Act, 1961, and under Article 12(3)(a) of the India–Belgium DTAA. Consequently, the AO disallowed the expenditure under Section 40(a)(i), alleging failure to deduct tax at source (TDS).
The Tribunal had initially, in December 2021, upheld the disallowance, categorising the payments as “industrial/equipment royalty.”
However, Bekaert filed a Miscellaneous Application, arguing that the Tribunal had relied on the wrong treaty text. The company pointed out that, following a 2001 Gazette Notification [S.O. 54(E), dated January 19, 2001], the India–Belgium DTAA had been amended to exclude the phrase “use of industrial, commercial, or scientific equipment”from the definition of royalty.
This recall was accepted in October 2023 to re-examine the issue under the correct treaty provisions.
While reconsidering the case in January 2024, the two Members of the Tribunal differed.
The Judicial Member held that, since the India–Belgium DTAA does not include the clause relating to industrial/equipment royalty, the payments could not be taxed as royalty.
The Accountant Member opined that the IT infrastructure facility constituted a “plant” and hence fell within the ambit of royalty under the treaty.
The matter was referred to a Third Member, who, after detailed examination of the treaty text and prior case law, concurred with the Judicial Member.
The Third Member observed that the term “plant” appearing in Article 12 of the treaty was a typographical error, and the correct word was “plan.” This conclusion was supported by the Gazette Notification No. S.O. 54(E) (19 January 2001), which redefined “royalty” in the DTAA; and prior rulings such as Baggerwerken Decloedt En Zoon v. DDIT, where the Chennai ITAT had confirmed the same interpretation.
Accordingly, the Tribunal held that the India–Belgium DTAA excludes payments for the use of industrial, commercial, or scientific equipment from the definition of royalty.
“The payments made for use of IT infrastructure facilities do not fall within the ambit of industrial royalty or equipment royalty on account of the exclusion of the expression ‘use of industrial, commercial or scientific equipment,’” the order stated.
Thus, the ITAT ruled that no tax was required to be withheld on such payments, and the disallowance under Section 40(a)(i) was unsustainable.
Following the majority view, the Tribunal allowed Bekaert Industries’ appeal and deleted the disallowance made by the tax department.
Case Details
Case Title: M/s. Bekaert Industries Private Limited versus DCIT
Case No.: ITA No.1003/PUN/2017
Date: 14.10.2025
Counsel For Appellant: Hirali Desai and Amol Mahajan
Counsel For Respondent: Hitendra Ninawe
, Pune Bench has held that amounts paid by Bekaert Industries Pvt. Ltd. to its Belgian associate N.V. Bekaert SA for use of IT infrastructure facilities are not taxable as royalty under the India–Belgium Double Taxation Avoidance Agreement (DTAA).){kind=link}