ITAT Rules Rothschild’s Intra-Group Advisory and Support Services Not Taxable as FTS Under India-UK DTAA

In a recent ruling, the Income Tax Appellate Tribunal  (ITAT) Delhi bench held that intra-group and advisory support services provided are not taxable as Fees for Technical Services (FTS) under the India-UK Double Taxation Avoidance Agreement (DTAA), as they do not meet the 'make available' criterion.

The assessee, N.M. Rothschild & Sons Ltd., is a company incorporated in the United Kingdom. It provides financial advisory and support services to its group entities globally.

For the Assessment Year (A.Y.) 2020-21, the assessee received ₹6,82,50,796 from Rothschild (India) Pvt. Ltd. The receipts included ₹2,47,83,056 for group services and ₹4,34,67,740 for transaction advisory services.

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DTAA – International Taxation Click Here

The Assessing Officer (AO) treated the entire amount as taxable in India as FTS under Article 13 of the India-UK DTAA. The Dispute Resolution Panel (DRP) upheld this view without offering an independent analysis of the 'make available' clause.

Aggrieved by the order, the assessee preferred an appeal before the ITAT.

CA Soumya Jain, representing the assessee, contended that the services rendered were advisory and supportive in nature. These did not result in the transfer of technical knowledge or skill that could enable the Indian entity to perform the same services independently.

It was submitted that Article 13(4)(c) of the DTAA requires that for a service to be classified as FTS, it must make available technical knowledge or experience. The assessee relied on prior decisions of the tribunal in its own case for A.Y. 2018-19 and A.Y. 2019-20, where similar payments were held to be non-taxable ( N.M. Rothschild & Sons Ltd. v. DCIT (2022) ).

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Meanwhile, Sahil Kumar Bansal, the counsel representing the revenue, argued that the services were technical and managerial in nature and hence fell within the scope of Article 13. It was contended that the Indian entity derived benefit from these services, and therefore, the income was taxable as FTS.

The tribunal, however, found that the services were routine support functions involving areas like HR, compliance, legal, and finance. Even the transaction advisory services were like professional advice without any transfer of skill or technical know-how.

DTAA – International Taxation Click Here

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The bench observed that the Revenue failed to demonstrate how the services made available any technical knowledge to the Indian affiliate. It reiterated that the mere rendering of advice or assistance does not meet the 'make available' condition under Article 13(4)(c) of the India-UK DTTA.

The tribunal followed its earlier orders in the assessee’s own case and held that none of the services enabled the recipient to perform them independently in the future. As such, the income was not taxable in India as FTS.

The bench led by Challa Nagendra Prasad (Judicial Member) and  M. Balaganesh (Accountant Member) thus deleted the addition of ₹6,82,50,796 made by the AO and dismissed the case.

To Read the full text of the Order CLICK HERE

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