ITAT rules on routine business support services

ITAT rules on routine business support services

The bench rejected the appeal filed by the Income tax department

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the routine business support services are not taxable as fees for technical services (FTS). These do not make any technology or skill available to the recipient.

The appellant-assessee Magotteaux International SA, a tax resident of Belgium, is engaged in the business of providing consultancy and other services. It entered into an agreement with Magotteaux Industries Private Limited (MIPL) to render such services to it in India.

The appellant filed its Income Tax Return (ITR) showing 'Nil' taxable income. It stated that the services were provided by MIPL from outside India.

However, during the scrutiny assessment proceedings, the assessing officer (AO) noted that the appellant received the group management fees for rendering different services to MIPL. The AO said that apart from being managerial and consultancy, the services were technical in nature. He maintained that the services were taxable as fees for technical services (FTS) under the India-Belgium Double Taxation Avoidance Agreement (DTAA) and under the provisions of the Income Tax Act, 1961.

The tribunal bench comprising Judicial Member Astha Chandra and Accountant Member NK Billaiya observed that the services received by MIPL were not technical or consultancy related.

ITAT stated, "The business support services rendered by the assessee from Belgium do not qualify the test of make available under the tax treaty. Therefore, we direct the AO to delete the impugned addition."