April 2019

Article 13(4)(c), Article 7 of India-UK DTAA – the development and supply of a technical plan or a technical design does not amount to ‘making available’ technical knowledge, experience, skill, knowhow or process to the service recipient; amount paid for such services does not qualify as FTS.

Geeta Jani | Dhishat B. Mehta
Chartered Accountants

3.       TS-76-ITAT-2019 (Mum) Buro Happold Limited vs. DCIT A.Y.: 2012-13 Date of Order: 15th February, 2019

 

Article 13(4)(c), Article 7 of India-UK DTAA – the development and supply of a technical plan or a technical design does not amount to ‘making available’ technical knowledge, experience, skill, knowhow or process to the service recipient; amount paid for such services does not qualify as FTS.

 

FACTS


Taxpayer, a company incorporated in the UK was involved in the business of providing engineering design and consultancy services. Taxpayer also rendered these services to its Indian affiliate, I Co. During the year under consideration, I Co made payments to the Taxpayer towards provision of consulting services as well as towards a cost recharge of common expenses incurred by the Taxpayer on behalf of the group.

 

Taxpayer contended that the consultancy services did not qualify as “Fee for included services (FIS)” under the treaty in the absence of satisfaction of the ‘make available’ condition. Further, in absence of a PE in India, such income is not taxable in India. Taxpayer also contended that the amount received towards cost recharge is not taxable in India, since such amount was a part of cost allocation made by the Taxpayer on a cost-to-cost basis without any profit element. 

 

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