India: Support services fees not “fees for technical services” under tax treaty with Belgium (tribunal decision)

Tribunal decision concerning support services fees as fees for technical services under tax treaty with Belgium

Support services fees not “fees for technical services” under tax treaty with Belgium

The Delhi Bench of the Income-tax Appellate Tribunal held that business support services provided by the taxpayer to an Indian company are not taxable as fees for technical services under the India-Belgium income tax treaty, applying the “most favoured nation” (MFN) clause to incorporate the relevant rules under the India-Portugal income tax treaty.

The tribunal noted that under the India-Portugal income tax treaty, business support fees may be treated as fees for technical services only if such fees are for services that make available technology, experience, skill, know-how, or processes, or that consist of the development and transfer of a technical plan or technical design that enables the person acquiring the services to apply the technology contained therein.

The tribunal held that by virtue of the MFN clause, the restricted scope under the India-Portugal tax treaty applies with regard to the India-Belgium tax treaty, and because the business support services provided by the taxpayer do not make available technology, etc., they did not qualify as fees for technical services.

The case is Magotteaux International SA v. DCIT.

Read a February 2022 report [PDF 428 KB] prepared by the KPMG member firm in India

Gifts to medical practitioners are nondeductible (court decision): The Supreme Court recently held that gifts to medical practitioners are “prohibited by law” and cannot be allowed as a business deduction under section 37(1) of the Income-tax Act, 1961.

The case is Apex Laboratories Pvt. Ltd. v. DCIT.

Read a February 2022 report [PDF 280 KB] prepared by the KPMG member firm in India

 

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