Income Tax, Issue Update

Inclusion/ Exclusion of management services within ambit of “make available” clause: Scope of Fees for Included Services under respective article of the tax treaty

Case: Steria India Ltd vs. ACIT, Delhi ITAT

Outcome: Partial


  • The Assessee Company had entered into an agreement for managerial service with a France based company and claimed deduction towards payment of management services fees during the year.
  • However, the Assessing Officer had disallowed the management service fees paid during the year under consideration for non- deduction of tax at source on the services of technical nature.
  • Aggrieved by the same, the Assessee raised a ground of appeal stating that the Assessing Officer erred on facts and in law in not appreciating that the said services provided by Steria France does not ‘make available technical knowledge’, experience, or skill to the Assessee, in order to be taxed as Fees for Technical Services in terms of Paragraph 7 of the Protocol read with Article 13 of the tax treaty.

Key points

  • The Tribunal placed reliance on the decision in Assessee’s own case, wherein it was held that the definition of fees for technical services occurring in Article 13(4) of the Indo-UK tax treaty clearly excluded managerial services. What was being provided by the Assessee company in terms of the Management Services Agreement was managerial services.
  • It was observed that once the expression ‘managerial services’ was outside the ambit of ‘fee for technical services’, then the question of having to deduct tax at source from payment for the managerial services, would not arise.
  • Therefore, following the same in the present facts of the case, the tax was not required to deduct on management services fees by the Assessee.

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