Delhi High Court: IT, Admin Services by Singapore Entity to Indian Affiliate Does Not Constitute FTS
Delhi High Court: IT, Admin Services by Singapore Entity to Indian Affiliate Does Not Constitute FTS
The Delhi High Court ruled that the information technology and other administrative services provided by the respondent to its Indian affiliate could be considered Fees for Technical Services (FTS).
Justices Rajiv Shakdher and Girish Kathpalia found that the services offered by the respondent to its Indian affiliates did not qualify as FTS under Article 12(4)(b) of the Indo-Singapore Double Taxation Avoidance Agreement (DTAA), as they did not meet the “make available” criterion.
In the draft assessment order, the AO ruled that the services provided by the respondent to its Indian subsidiary were management support services, taxable at 10 per cent plus surcharge and education cess under the Indo-Singapore DTAA.
The respondent's objections to the draft assessment order were rejected by the Dispute Resolution Panel (DRP), leading to the final assessment order being passed by the AO under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961. The respondent then appealed the assessment order to the Tribunal.
The Tribunal ruled in favour of the respondent, finding that the services offered to its Indian affiliates did not qualify as FTS under Article 12(4)(b) of the Indo-Singapore DTAA, as they did not meet the "make available" criterion.
The department argued that the assessee provides professional advice to its Indian subsidiary, including studies, evaluation, report reviews, liaison work, key policy and business operations advice, HR management, and financial management.
The Court upheld the Tribunal's order, holding that the agreement between the respondent/assessee and its Indian affiliate had been effective from January 1, 2010. The Court reasoned that if technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, as contended by the appellant/revenue, the agreement would not have lasted for so long.
