Advisory services not taxable as fees for included services under India-US DTAA: Calcutta High Court
Commissioner of Income Tax (International Taxation and Transfer Pricing) Vs. The Timken Company (IA No.GA/2/2022)
- The assessee- The Timken Company, a US Company, entered into an agreement with Timken India Limited (TIL), its Indian Subsidiary, for providing certain services.
- The Assessing Officer (AO) opined that the compensation payable by the recipient/TIL to the assessee was in the nature of Fees for Included Services (FIS), taxable under Article 12 of the Indo-USA Double Taxation Avoidance Treaty (DTAA).
- The assessee argued that agreement between the parties was purely for rendering advisory services and such advisory services cannot be treated as Fees for Included Services under Article 12(4)(b) of the Indo-US DTAA since there is no technology which is made available to the recipient.
Hon Calcutta HC held as below:
- The assessee was rendering only advisory services, which cannot be treated as included services under Article 12(4)(b).
- ITAT’s order setting aside the additions made to the foreign assessee Company’s income for the compensation received by it for rendering advisory services to its Indian subsidiary, is upheld.