April 2019

Article 12 and Article 14 of DTAA Consultants providing technical consultancy services in the capacity of an advisor and who also bears the risk in relation to such services, would be treated as an independent person services rendered by them would qualify as Independent Personal Services.

Geeta Jani | Dhishat B. Mehta
Chartered Accountants

1.       TS-43-ITAT-2019 (AHD) DCIT vs. Hydrosult Inc. A.Y.: 2011-12 Date of Order: 31st January, 2019

 

Article 12 and Article 14 of DTAA Consultants providing technical consultancy services in the capacity of an advisor and who also bears the risk in relation to such services, would be treated as an independent person services rendered by them would qualify as Independent Personal Services.

 

FACTS

Taxpayer, a foreign Company incorporated in Canada, was engaged in the business of providing technical consultancy services for development of irrigation and water resources in India. During the year under consideration, Taxpayer was awarded a contract for providing consultancy services in relation to irrigation development project. In relation to the said project, Taxpayer made payments to certain non-resident individuals as fees for consultancy services. Taxpayer did not withhold tax from the payments on the ground that such payments were not chargeable to tax in India for the following reasons:

 

a. Payments made to professionals were in the nature of independent personal services (IPS).

b. Aggregate period of presence of such professionals in India did not exceed the threshold provided in the treaty.

c. Professionals did not have a fixed base in India.

 

The Assessing Officer (AO),

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