Relief to Linklaters LLP: Remuneration received by Law Firm for Providing Legal Services Not Taxable as “FTS” as per Indo-UK Treaty, rules ITAT [Read Order]

The Mumbai Income Tax Appellate Tribunal ( ITAT ) while providing relief to Linklaters LLP ruled that remuneration received by a law firm for providing legal services is not taxable as Fee for Technical Service (FTS) as per the Indo-UK treaty.

Assessee Linklaters LLP is a limited liability partnership incorporated under the laws of the United Kingdom, engaged in providing legal services. The assessee is registered with the Registrar of Companies for England and Wales under the Limited Partnership Act, 2000 of the UK.

The assessee provides legal services to its clients on projects undertaken which are related to matters like mergers, acquisitions, restructuring, financing and tax, etc. The services rendered by the assessee are for drafting of documents and legal due diligence based on non-Indian laws

After filing the return the assessee case was selected for scrutiny thereafter the assessing officer levied tax on the income received from the legal services and the income considered as Fee for Technical service. Against the order assessee filed an appeal before the ITAT.

Niraj Sheth counsel for the assessee submits that the service provided by the assessee was not ‘make available’ technologies, which are utilized by the assessee’s clients for future purposes. Further, the impugned services are provided to non-Indian parties in connection with activities outside India and, therefore, cannot be deemed to arise in India. 

Surabhi Sharma counsel for the revenue contended that 

“The services rendered by the assessee to be technical in nature and the fees for included services are within the meaning of Article 13 of the India-UK DTAA and taxed the whole income in India as per the Explanation 1 to section 9 of the Income Tax Act,1961 which is suffice to say that if the services are utilized in India then the same amount to taxability in India”

After considering the contentions of both the parties the division bench of the ITAT comprising B. R. Baskaran, (Accountant Member) and Kavitha Rajagopal, (Judicial Member) allowed the appeal filed by the assessee and observed that revenue has failed to prove that the same would fall under the category of ‘fee for technical services’ as envisaged in Article 13 of the India-UK DTAA and thereby holding that the same cannot be brought to tax as ‘FTS’ as per section 90(2) of the Income Tax Act,1961.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates