TDS credit allowed on Commission Income as it was not ‘Managerial Service’ under India Germany DTAA

Springer Verlag GmbH Vs D.C.I.T. International Taxation (ITAT Delhi)

Conclusion: TDS credit was allowed as the commission income was not ‘managerial service’ under India Germany Double Taxation Avoidance Agreement (DTAA).

Held: The common grievance in both the appeals relates to the treating of commission income received by the assessee from Springer Nature India Private Limited (SNIPL) as fee for technical services (FTS) under Article 12 of the India-Germany DTAA by the CIT(A) by changing the colour of income, which was treated as royalty by the Assessing Officer. It was held that managerial services entail the element of management of the business of the service recipient in a substantial manner. Mere provision of support services could not be labelled as managerial services. Hiring of outside parties to receive support in respect of the operational aspects of a business could not qualify as managerial services unless the service provider lay down policies or executed such policies by managing the personnel of the service recipient. There was no merit in the findings of the CIT(A) by treating the commission as ‘managerial service’ under the India Germany DTAA. Thus, AO was directed to consider the claim as per the provisions of law and allow full credit of TDS after due verification.

FULL TEXT OF THE ORDER OF ITAT DELHI

The above two captioned separate appeals by the assessee are preferred against the order of the ld. CIT(A) – 43, New Delhi dated 19.10.2018 for Assessment Year 2014-15 and 01.02.2019 for Assessment Year 2015-16. Since common grievances are involved in both the appeals, they were heard together and are disposed of by this common order for the sake convenience and brevity.

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