Consultancy Charges paid by Kuiper Compagnons to Overseas Entities Taxable as FTS: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the consultancy charges paid by Kuiper Compagnons to overseas entities are taxable as Fee for Technical Service (FTS).

Kuiper Compagnons Rumtelikje Ordering Stedenbouw Architecture Landscape BV, the assessee is a non-resident corporate entity incorporated in the Netherlands.  The assessee filed its return of income declaring income of Rs.8,48,930/- and claiming a refund of Rs.28,48,790/-. 

The Assessing Officer noticed that in the relevant financial year, the project of the office of the assessee had claimed certain expenditures as consultancy charges.  On further scrutiny, the Assessing Officer found that no tax has been deducted on payment of consultancy charges. 

It was explained by the assessee that the payment made is not like FTS to question the Assessing Officer to explain why the payment made islikea fee for technical services (FTS) under section 9(1)(vii) of the Act, no tax was deducted at source.

The Assessing Officer held that the amount paid towards consultancy charges was liable for deduction of tax under section 195 of the Income Tax  Act.  The Assessing Officer disallowed the consultancy charges paid to two parties aggregating to Rs.76,14,726/- by invoking the provisions of section 40(a)(i) of the Income Tax Act, 1961. The DRP rejected the objections of the assessee. 

A Coram comprising of Shri G S Pannu, President and Shri Saktijit Dey, Judicial Member observed the assessee was unable to furnish any cogent explanation supported by evidence to establish that the consultancy charges paid are not like FTS. 

Further, it was observed that the assessee failed to controvert the concurrent finding of the departmental authorities to the effect that the consultancy charges paid are like FTS. While dismissing the appeal, the ITAT upheld the disallowance made under section 40(a)(i) of the Income Tax Act, 1961.

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