Services under the MSA leverage on the Assessee’s technical and technological expertise and, therefore, are in the nature of technical/consultancy services under Art 13.4(c) of India-UK Tax Treaty.
AIRCOM INTERNATIONAL LTD., IN RE
(2021) 110 CCH 0100 IAAR
Short Overview:
Exemptions
Fees for technical services of foreign company
Assessee is a company incorporated in England—A India’ is a company incorporated in India and is wholly owned subsidiary of Assessee and is engaged in business of software solutions and consultancy business in area of telecommunications
Assessee has entered into a Management Service Agreement (“MSA”) with its subsidiaries including A India, whereby Assessee provides various management support services to A India with a view to rationalize and standardize business conducted by A India in India in accordance with international best practices
Assessee has filed present application in connection with this MSA and raising question as to whether payments being made by A India to Assessee under MSA for services specified there under would be characterized as “fee for technical services “(FTS)
Held, Assessee was rendering specific services under I.T. services i.e Wide Area Network, Server Management, Exchange System, Help Desk, and Direct Technical Advice, Support and Management including implementation
First four functions were general in nature but ‘direct technical advice and support’ was in respect of specific technical issue
Technical advice in respect of problem faced by clients was rendered through employee of A India only
Thus, services in nature of “direct technical advice, support and management including implementation” were not only technical in nature but were also made available to A India
Such advice was not in respect of any outage on A network or troubleshooting of malfunctions in IT infrastructure; rather it was in respect of specific technical problem faced by clients of A India, which was flagged to Assessee for resolution and solution of which was provided through employees of A India
Therefore, this service was not only technical in nature but was also made available
Payment received for various services in terms of MSA was not managerial but technical in nature
Only “direct technical advice, support and management including implementation” service provided under Information Technology (IT) service meets requirement of ‘make available’ in cl. (c) of art. 13.4 under treaty
Therefore, only this particular service is found to be in nature of “fee for technical services” under art. 13.4(c) of India-UK Tax Treaty
Assessor’s ground partly allowed.
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