India: Tax treatment of support services, offshore supply of equipment under treaties with UK and France
India: Tax treatment of support services
The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).
- Support services treated as “fees for technical services” under tax treaty with UK: The Authority of Advance Ruling (AAR) addressed the tax treatment of support services provided under a management service agreement. The AAR concluded that the payments made by the Indian entity for direct technical advice, support, and management services were taxable as fees for technical services under a provision of the income tax treaty between India and the United Kingdom but that payments for consultancy services that were merely advisory in nature and merely involved the discussion and advice of a routine nature were not to be treated as fees for technical services under the treaty. The case is: Aircom International Ltd. Read a February 2021 report [PDF 309 KB]
- Offshore supply of equipment under tax treaty with France: The AAR addressed the tax treatment of an offshore supply of equipment and services in India. The AAR determined that the consideration received for the offshore supply of equipment was not taxable in India. However, the AAR ruled that the consideration received for basic engineering design services and offshore advisory services in relation to the construction, production, installation, commissioning and testing of the manufacturing plant were taxable in India because these services were inextricably connected with the setting up of the plant and were rendered through a permanent establishment in India. Thus, the profits were taxable in India under provisions of the India-France income tax treaty. The case is: Technip France SAS. Read a February 2021 report [PDF 276 KB]
- Training centres of a Canadian entity: The Mumbai Bench of the Income-tax Appellate Tribunal held that the activities of a training centre in India were not devoted wholly to the taxpayer and that such training centres did not constitute a dependent agent permanent establishment in India. The case is: International Air Transport Association. Read a February 2021 report [PDF 336 KB]
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