Executive Search Fee is not 'Fee for Technical Services' under India Netherlands Tax Treaty: ITAT [Read Order]

A Division Bench of the Income Tax Appellate Tribunal (ITAT), Mumbai held that Executive search fee is not 'fee for technical services' under India Netherlands Tax Treaty.

The assessee,Spencer Stuart International B.V is a tax resident of Netherlands and is entitled to the benefits of India-Netherlands tax treaty. For the year under consideration, assessee filed its return of income declaring total income of Rs. 17 lakhs. The assessee is engagedin business of executive search services and related support services to group companies and third-party franchises.

The case of the assessee was selected for scrutiny and an assessment order was passed under section 144C of the Act total income of the assessee was computed at Rs. 21 crores after making various additions. The assessee filed detailed objections before the learned DRP. In conformity, the Assessing Officer (AO) passed the final assessment order under section 143(3) read with section 144C(13) of the Act. Being aggrieved, the assessee is in appeal before the Tribunal.

The Coordinate bench of Tribunal allowed the appeal filed by the assessee on this issue, by observing that “We conclude by holding that the Assessing Officer erred in holding that the Executive search fee was in the nature of 'fee for technical services' under Article 12(5)(a) as well as 12(5)(b) of the India Netherlands Tax Treaty and also erred in his alternative conclusion that the same was taxable as 'Royalty' under Article 12(4) of the India-Netherlands Tax Treaty read with clause (iv) of Explanation-2 to Sec. 9(1)(vi) of the Act.”

The Bench of Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member observed that “We are of the considered view that findings rendered in preceding assessment year are equally applicable to the year under consideration even though it is not covered by the aforesaid APA.”

“Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee’s own case cited, we uphold the plea of the assessee and direct the AO to delete the addition on account of search fees” the Tribunal said.

To Read the full text of the Order CLICK HERE

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