By Geeta Jani | Dhishat B. Mehta
Chartered Accountants
22. TS-767-ITAT-2018 (Mum) Entertainment
Network (India) Ltd vs. JCIT Date of Order: 21st December, 2018
A.Y.: 2011-12
Article 13 (4) of India-France DTAA – Make available
condition of India-UK DTAA to be read into India-France DTAA. Advisory services
for review of strategic and mergers and acquisitions options, do not qualify as
FIS in absence of satisfaction of make available condition.
FACTS
Taxpayer, an Indian company made payment to a French Company (FCo)
towards professional services3 rendered during the relevant year.
Taxpayer contended that services rendered by FCo were not technical services
and hence did not qualify as FTS. Without prejudice, by virtue of the Most
Favoured Nation clause (MFN clause) in the India-France DTAA, the make
available condition of India-UK DTAA had to be read into India-France DTAA. In
absence of make available condition being satisfied, payment made to FCo did
not qualify as Fee for included services (FIS). Further, in absence of a
permanent establishment of FCo in India, such income was not liable to tax in
India.
However, AO contended that the services rendered by FCo qualified as FTS
and hence in absence of any withholding, disallowed the payments made to FCo.
Aggrieved, Taxpayer appealed before the CIT(A) who upheld the decision
of AO.
Consequently, Taxpayer appealed before the Tribunal.
HELD
- By
virtue of the MFN clause, make available condition had to be read into
India-France DTAA. The phrase “make available” means that the knowledge,
experience, skill, knowhow, etc should be passed on to the service
recipient such that the service recipient can carry out the services on
its own.
- ICo
would have to go back to FCo if it wished to avail similar services from
FCo in future. Hence, the advisory services rendered by FCo, did not make
available any technical knowledge, experience, skill, etc., to ICo.
- Hence,
services rendered by FCo did not qualify as FIS and hence there was no
requirement to withhold taxes on payments made to FCo in India4.
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3. FCo rendered advisory services by way of review of strategic and
mergers and acquisition options for ICo.
4. It appears that FCo did not have a PE in India.
