Case Law Details
Managerial and consultancy services provided by a French company are ‘made available’ to the Indian company and therefore taxable as Fees for Technical Services in spite of Most Favoured Nation clause under the India-France tax treaty
As regards consultancy services, the question is whether such services are made available in the context of the DTAC between India and France read with the DTAC between India and US relied on by the applicant. It is seen that the advice and assistance rendered by the French Company to the applicant are not transient in nature and are capable of being used by the applicant on its own. It is true that some of the consultancy services rendered may not have that quality of permanency and may be a one time assistance, but advice on business strategy, on general management, on marketing and commercial matters,
on financial control and accounting matters, and on purchase and sales, environment and safety and the giving of training to optimize sales techniques to the employees of the applicant, are all capable of being put to use by the applicant on its own. The services are enduring and they help in promoting the business of the applicant. The employees of the applicant are in a position to, actually they are expected to use the knowledge gained, in the business of the applicant. Thus, knowledge and know-how are made available to the applicant. Hence, on an understanding of the over all effect of the services agreement, it has to be held that the consultancy services are made available to the applicant.
Thus on a true construction of the services agreement between the applicant and the French company, I hold that the French company is rendering managerial and consultancy services to the applicant. The managerial services are taxable under paragraph 4 of Article 13 of the DTAC. They are taxable even if one were to invoke the concept of ‘make available’ for making the payments for such services taxable. The consultancy services provided are taxable in terms of Article 13.4 of the DTAC between India and France read with paragraph 4 of Article 12 of the India-US DTAC.
AUTHORITY FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI
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