The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the services in the nature routine support services cannot be treated as Fee for Technical Services under the Indo-US Tax Treaty and therefore, no TDS deductible under section 195 of the Income Tax Act.
Assessee debited an amount Rs. 14,00,976/- to its profit and loss account under the head “other cost recharge” and claimed that it is in the nature of provision for ‘time writing charges’ based on estimated time cost of employees of the assessee company’s sister concern British Gas International Ltd. The Assessing Officer held that TDS has not been deducted on the said provision since the payments were in the nature of fee for technical services and therefore, completed assessment proceedings against the assessee.
The assessee contented that the impugned payment cannot be considered as FTS, as nothing was made available to the assessee by BGIL.
The Tribunal noted that the amount received by BGIL from the assessee has already been taxed in India u/s 44BB of the Act and as mentioned elsewhere, taxes have been duly deducted from the payments made for the time writing charges to BGIL.
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“Be that as it may, the time writing charges paid to BGIL cannot be termed as ‘FTS” under the Act read with India UK DTAA,” the Tribunal said.
“In our understanding, ‘make available’ means the person acquiring the services is enabled to apply technology contained therein on his own in future without recourse to the service provider which means that the knowledge must remain with the service recipient once service has ended and thereafter, service recipient is at liberty to use the technical knowledge, skill know-how and processes. In our understanding of the facts, the service provided by employees of BGIL are merely in the nature of routine support services and, therefore, cannot be termed as ‘FTS’ under Article 13 of the India UK DTAA. Therefore, there was no requirement for the assessee to deduct taxes from such payments in India u/s 195 of the Act,” the Tribunal added.
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