Payment for Administrative Support Services Do Not Qualify as Fees for Technical Services Under India-UK DTAA: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that payments received in lieu of administrative support services do not qualify as fees for technical services under the India-UK double tax avoidance agreement (DTAA).

The assessee, Jefferies International Ltd., is a corporate entity that is a tax resident of the UK and has a subsidiary in India, Jefferies India Private Ltd. (JIPL). The assessing officer (AO) observed that the assessee had provided administrative support services to the Indian subsidiary during the year under consideration.

It was noted by the AO that the consideration for such services was recovered from the Indian subsidiary at cost. Before the AO, the assessee made the contention that the consideration that is received towards the provision of administrative support services is not taxable in India.

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The assessee submitted that the fees received on account of the provision of administrative support service do not fall within the ambit of FTS, as provided under Article 13(4) of the India-UK Tax Treaty, as they are not like technical and consultancy services.

The AO considered the administrative support services fee as FTS and imposed a tax on the assessee.

The first appellate authority, by referring to the assessee’s case for the assessment year 2012-13 had held that the fee received towards administrative support services cannot be regarded as FTS under Article 13 of the Treaty.

The ITAT, by referring to the judgement of the co-ordinate bench for the assessee’s case which had identical issues for the assessment years (AY) 20212-13, noted that the fee received towards administrative support services will not qualify as FTS under the treaty provisions.

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The coordinate bench, in its judgment by going through the services that are provided by the assessee noted that they were not technical services nor do they require any technological knowledge, skill, or experience.

The bench noted that “the services provided by the group entities or holding company to its subsidiaries as support services to run their business effectively will not be considered as FTS or FIS under the treaty, and these services do not amount to make available technical skills or expertise while providing these services. Therefore, in our considered view, the services provided by the assessee to its subsidiaries are only to support to function the administration and day-to-day management of JIPL because JIPL does not have any infrastructure to carry out any administration and day-to-day management. “

The bench by referring to the above-mentioned decision of the coordinate bench, reached a conclusion that the services in question are outside the ambit of FIS and FTS.

The order was passed by Padmavathy S. (accountant member) and Saktijit Dey (vice president).

To Read the full text of the Order CLICK HERE

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