ITAT: Payment Received From Foreign Company On Account Of Business Support Services Not Taxable As


The Delhi Bench of the Income Tax Appellate Tribunal in the case Inteva Products Netherlands BV Versus ACIT observed and has held that the payments which are received from foreign companies which are to be held taxable as fees for technical services on account of business support services.

The two-member bench comprising of Judicial Members, Anubhav Sharma and the Accountant Member, Shamim Yahya in the case observed that Article 12(5) of the India-Netherlands DTAA reveals that it does not include the managerial services within FTS. Thus, the payment which is being received by the assessee, it cannot be treated as FTS under the India-Netherlands DTAA.

In the present case, the appellant or assessee being a company ncorporated in the Netherlands and is a tax resident of the Netherlands. It has been concluded by AO hat the payment of an amount of Rs. 11,85,39,571 which is being received by the assessee from a foreign company on the account of the business support services which was being taxable as FTS at the rate of 10% plus surcharge and education cess and the same has also been added to the total income of the assessee.

Before the court, it has been submitted by the assessee that the AO, which being pursuant to the directions of DRP, erred in treating the receipts of fees for supporting the business services as FTS as per the Article 12 of the tax treaty between India and the Netherlands without appreciating that the said services which are being managerial in nature and hence these services do not fall within the definition of FTS.

Further, it has been held by the Tribunal that the payment which is received cannot be treated as FTS under Article 12(5) of the India-Netherlands DTAA and that the addition made is to be deleted.

Accordingly, it has also been noted by the ITAT that neither the Assessing Officer nor the DRP has established that, by rendering the said services, the assessee in the case has been made available the technical knowledge, the know-how, skill, etc. to the recipient of the services, the services would have enabled the recipient of the services for utilizing it independently without the aid and assistance of the assessee.