Friday, February 10, 2017

Payment made for administrative services couldn't be held as 'FTS' under India-UK treaty

a) The appellant, UK based company, was awarded a contract by IOCL for rendering construction support services, procurement services and engineering design services in connection with a refinery located in India.

b) It availed of various support services such as account receivable, human resources, and payroll management, tax support and administrative support, etc., from its sister concern FWEL.

c) Department took the stand that the payments for FWEL services were in the nature of fees for technical services (FTS) by relying on invoices issued to FWEL which describe the category of services as 'consulting engineering services'.

d) Department further pointed out that it was admitted by the applicant that the persons whose names appear in the time-sheets was in fact engineers which further buttresses the department's stand that the services rendered were in the nature of engineering services which would be technical in nature satisfying the 'make available' clause of the India-UK DTAA.

e) Aggrieved by the order of AO, applicant raised this issue before the Authority for Advance Rulings (AAR).

Authority for Advance Rulings held in favour of applicant as under:-

1) Affidavit given by the applicant clarified that the reference to time spent by engineers in the sample invoice were its own engineers deputed in India Project Office and not any engineers of FWEL, and hence no engineering services were rendered by FWEL.

2) Mere mention of 'engineering services' on the invoice cannot satisfy 'make available' clause.

3) Services rendered by third parties and FWEL were administrative support services rendered from abroad and were in the nature of 'managerial services'. Such services did not make available any technical skill, information or knowledge to the employees of applicant deputed in the India Project Office.[2017] 77 205 (AAR - New Delhi)

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