Brief of the case:
- The ITAT Mumbai in the case of Mckinsey Business Consultants Vs. DDIT held that if there is no clause in DTAA to tax fees for technical services (FTS) then the same is taxable as business profits provided the income is earned by assessee through a PE in India.
- Further , such income cannot be taxed as FTS under the provisions of Act because the residuary clause of India- Greece DTAA does not allow the incomes earned in ordinary course of business to be checked with I.T Act , it is only residuary incomes which need to be checked under the Act that too when DTAA is silent.
Facts of the case:
- The assessee is a foreign company incorporated in Greece providing assistance in the form of borrowed service to its associate concern (McKinsey India) in consideration for which, the assessee received an amount from the Indian company.
- The said income was not offered to tax by the assessee in the return on the ground that the said income was earned in the course of business of the assessee and, therefore, it qualified as business profits under Article 3 of India-Greece DTAA.
- Since the assessee did not have any permanent establishment (PE) in India, its income was not liable to be taxed in India. The Assessing Officer observed that in view of the findings given in the assessment orders for the earlier years of the group entities, the said amount was to be taxed as fees for technical services(FTS) within meaning of section 9(1)(vii) and also under the provisions of India-Greece DTAA.
- DRP confirmed the order of AO to tax the consideration as Fees for technical services on the ground that since the DTAA is silent on FTS, provision of Act shall apply.
Contention of Assessee:
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