Case Law Details
This Tax Alert summaries a recent ruling of the Authority for Advance Rulings (AAR) in the case of Ernst and Young Pvt. Ltd. (Applicant) on the tax ability of payments made for support services provided by an affiliate in the UK to the Applicant. The AAR held that the provision of support services does not ‘make available’ any technology to the Applicant and, hence, the payments made are not taxable in India as ‘fees for technical services’ (FTS) under the India-UK tax treaty (Tax Treaty).
Background and facts of the case
The Applicant is a company incorporated in India and is engaged in providing consultancy services. The Applicant is one of the member entities of Ernst & Young Global (EYG).
Ernst & Young (EMEIA) Services Ltd. (EY EMEIA), a limited liability company incorporated in the UK, is also a member of EYG. It provides support services in various fields such as area, global and market development etc. to the other member entities of EYG (Support Services). The member entities gain access to standardized human, financial and other resources to maintain uniformity in practices/ approaches in business and to ensure that consistent, high quality professional services are provided to the client base of all member entities of EYG.
The Support Services are provided under an area services and market development agreement (Agreement) entered between EY EMEIA and the other member entities of EYG. Under the Agreement, costs incurred for providing the services are allocated to the member entities, in accordance with an agreed formula.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
please note that all the DTAA do not have the same wording for tecnical services, and so one has to look in to the dtaa with the country before appliing this principle