Dtaa - definition of fees for technical service

This query is : Resolved

Prudvi Raj Saya (Querist)
Follow

07 November 2012 1. As per DTAA - INDO-SPAIN - The term “fees for technical services” as used in this Article means payments of any kind to any person other than payments to an employee of the person making the payments and to any individual for independent personal services mentioned in Article 15 (Independent Personal Services), in consideration for the services of a technical or consultancy nature, including the provision of services of technical or other personnel.

This definition is not quite specific. Can I get an exhaustive(at least illustrative) list of items covered under technical services? Is there any other better definition.

2. A foreign company re-invoices a professional service provided by another foreign company to it, to an Indian Co. In other words, it bills Indian Co based on invoice of other foreign Co. The service is provision of certain technical papers which is used to provide consultancy to the Indian CO.

The foreign company claims that this is business income (not fees for technical services) under Spain-Indo DTAA and hence TDS is not applicable.

Indian company says it is technical income and hence TDS is applicable.

Need an answer supported by references to the DTAA.

Thanks

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
Follow

08 November 2012 1. DTAA don't give exhaustive list of items to be covered under any Article, for that you need to understand the Indian Law[sec 9(1)(vii)]along with the relevant judicial rulings on the same issue.

2. Here,is the amount being billed is exactly the same as the original bill by foreign company?

The whole case needs to be seen in totality before giving any verdict on the nature of services.

Anuj
femaquery@gmail.com

Prudvi Raj Saya

Prudvi Raj Saya (Querist)
Follow

08 November 2012 Sir

Thanks for the reply
1. SO, the meaning of technical services in DTAA is same as the meaning as per the Income Tax Act?

2. No, only part of the original bill is billed to the Indian co.the service is purely professional in nature. The foreign company claims that it is reimbursement of original bill and hence business income.

I gave all the facts of the case in this and above posts.

Can you give an opinion based on the above? As far as I understand, it is fees for technical service prima facie, right? I've gone through DTAA and the Act and couldn't find anything to say it is business income.

Upgrade to CAclubindia Pro. Subscribe Now!

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
Follow

08 November 2012 Your understanding is correct on both points.

Anuj
femaquery@gmail.com