Business support service is tax exempt applying MFN clause under India-Belgium tax treaty

Shailendra Sharma – [2022] 136 taxmann.com 290 (Article)

Indian tax tribunal regards business support services that do not make available technology, skill, know-how, etc., to the Indian company is tax exempt under the provisions of Fees for Technical Services of the India-Belgium tax treaty by invoking the Most Favoured Nation restrictive make available clause from the India-Portugal tax treaty explained by Shailendra Sharma.

(Magotteaux International SA v. DDIT IT Appeal No. 1358 (Delhi) of 2015, dated 17-2-2022 in a case appealed before the Delhi Bench of the Income-tax Appellate Tribunal (Tribunal) contested on the taxability of business support services under Article 12 of the India-Belgium tax treaty (tax treaty). The Tribunal concluded that business support service is tax-exempt as Fees for Technical Services (FTS) under the tax treaty.

The Tribunal regarded the business support services as not any specific technology, skill, know-how, etc. service made available to the Indian company to not qualify as FTS by invoking the Most Favoured Nation (MFN) Clause of the tax treaty, by reading through the restricted or beneficial make available clause of the India-Portugal tax treaty into the India-Belgium tax treaty.

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