Sum paid to NR for providing advisory by way of reviewing strategies and M&A options not to be held as FTS
Facts:
a) Assessee-company engaged one ‘P’ in France to provide advisory services by way of review strategies and M & A options. It remitted certain amount as fees to ‘P’ for the said services without deduction of tax at source.
b) Assessing Officer (AO) took a view that amount paid to ‘P’ was taxable in India as fee for technical services. Since assessee did not deduct tax at source while making said payments, the AO disallowed same under section 40(a)(i).
c) CIT(A) confirmed disallowance made by AO. Aggrieved-assessee filed the instant appeal before the ITAT.
The ITAT held in favour of assessee as under:
1) The definition of ‘Fees for Technical Services’, under the DTAA between India and France, has to be given a restrictive meaning similar to that of the expression ‘Fees for Technical Services’ appearing in the DTAA between India and the UK.
2) Thus, the advisory services rendered by ‘P’ to the assessee did not ‘make available’ any ‘technical knowledge, experience, skill, know-how or processes’ to the assessee-company. Assessee-company would have to go back to ‘P’ even in future for availing similar advisory services.
3) In the absence of the professional services provided by ‘P’ ‘making available’ any ‘technical knowledge, experience, skill, know-how, etc.’ to the assessee-company, the remittance made to them was not chargeable to tax in view of the beneficial provisions under the DTAA and no tax was deductible at source on the said remittance.
4) Therefore, the remittance made to ‘P’ was not chargeable to tax in India and there was no requirement to deduct tax at source on the said remittance.
[2019] 102 taxmann.com 49 (Mumbai – Trib.)
