Receipt from Management Support Services by Wolters Kluwer Not Taxable as FTS under India-UK Treaty: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT)has held that receipt from management support services by Wolters Kluwer is not taxable as FTS under India-UK Treaty.

Wolters Kluwer Financial Services, the assessee is a non-resident corporate entity incorporated under the laws of Belgium and is a tax resident of Belgium.  The Assessing Officer observed that the assessee provides management support services, such as, administration, management, marketing and sale of the company’s product and other services. 

The assessee filed its return of income offering nil income claiming that the amount received by the assessee from providing management support services is not taxable in India and submitted that as per Article 12(3)(b) of the India-Belgium tax treaty, FTS includes payment received for services of managerial, technical or consultancy nature and chargeable to tax @10%. 

The Assessing Officertaxed the amount received as FTS by applying the rate of 15% on a gross basis. The CIT(A) observed that the assessee has advised the Indian subsidiary on a complete strategic business proposition and how to advance the business prospects efficiently and specifically in the Indian context.  Therefore, the services are more like consultancy services rather than managerial ones. 

Further concluded that the amount received from services, such as business planning, product management, business development, accounting and budgeting, planning, logistics and reporting, client contract and preferred provider agreement, finance and accounting system, human resource services, information system, corporate communication, legal services, etc. actually enable the recipient to apply the knowledge received. 

A Coram comprising of Shri G S Pannu, President and Shri Saktijit Dey, Judicial Member held that the nature of services provided by the assesseedoes not give any impression that they are not like managerial services. 

The ITAT viewed that the ‘make available’ condition of Article 13(4)(c) of the India-UK tax treaty has not been satisfied in the assessee case and the attribution of 50% of the receipts to the alleged consultancy services is purely on an estimate and without any reasonable basis. While allowing the appeal, the Tribunal deleted the addition sustained by Commissioner (Appeals).

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