DCIT Vs Converteam Group (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi has dismissed an appeal filed by the Deputy Commissioner of Income Tax (DCIT) against Converteam Group, a French tax resident company, for Assessment Year 2015-16. The ruling affirms the Commissioner of Income Tax (Appeals) [CIT(A)]’s decision that management support services provided by Converteam Group to its Indian entities were not taxable as Fees for Technical Services (FTS) under the India-France Double Taxation Avoidance Agreement (DTAA). The core of the dispute revolved around the applicability of the “most favored nation” (MFN) clause and the “make available” condition in tax treaties.
Case Background: Management Support Services and Tax Treaty Interpretation
Converteam Group, a French company involved in the electrification business and part of GE Power Conversion, received approximately INR 5.57 crores as management support charges from its Indian subsidiaries, GE Power Conversion India Private Limited and Converteam EDC Private Limited, during the assessment year in question.
The company contended that these charges were not taxable in India, relying on Article 13 of the India-France DTAA read with its Protocol. Specifically, they invoked the Most Favoured Nation (MFN) clause contained in Protocol 7 of the treaty. This clause stipulates that if India later enters into an agreement with another OECD member state that provides for a more restricted scope of FTS taxation, then such limited scope would automatically apply to the India-France DTAA. Converteam Group argued that the India-UK DTAA, with its more restrictive “make available” clause for FTS, should therefore apply to the India-France treaty.
