Payment made for Management, Sales and Marketing Support Services provided by Foreign Company not taxable as FTS under India -Netherland DTAA: ITAT [Read Order]

The Delhi bench Income Tax Appellate Tribunal ( ITAT ) held that payment made for management, sales and marketing support services provided by the foreign company is not taxable as Fee for Technical Service ( FTS ) under India -Netherlands Double Taxation Avoidance Agreement ( DTAA ).

The assessee NTL Lemnis India Pvt Ltd is engaged in the business of import/export, trading, manufacturing, commission agency , consulting, advising in any way dealing with lighting products and lighting solutions in the field of home lighting, public lighting, greenhouse lighting and solar lighting. The company is also engaged in research and development in the area of lighting products and solutions . 

During the assessment proceedings the AO noted that the assessee had claimed management fee amounting to Rs. 9 ,85 ,54 ,700/ – paid to NTL Lemnis Holding BV and Rs. 1,08,57,200/-. Before the AO the assessee filed management Agreement entered into by the assessee with NTL Lemnis Holding BV but not the Agreement in respect of management fee paid to NTL Electronics India Limited.

After examining the details AO held that the nature of services contemplated under the Agreement was that of advisory and consultancy services which would be covered within the meaning of ‘ fee for technical services’ (“FTS”) both under the Income Tax Act as well as the treaty.

Aggrieved by the order assesee filed an appeal before the CIT(Appeal). The CIT(A) held that the amount received by NTL Lemnis Holding BV for management and sales marketing support services as non-taxable in view o f the beneficial provisions o f India-Netherland tax treaty read with the MFN clause and the India Netherland treaty.

After analyzing the submission of both parties,the bench comprising Saktijit Dey, (Vice President) of Dr. B. R. R. Kumar, (Accountant Member) held that the MFN clause of India-Netherland Tax Treaty has been rightly interpreted by the CIT(A). Therefore the payment made for management, sales and marketing support services provided by the foreign company is not taxable as Fee for Technical Service (FTS) under India -Netherlands Double Taxation Avoidance Agreement ( DTAA ).Sanjay Kuma,counsel appeared for revenue .No one appeared for assessee.

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