Consultancy fee not taxable as FTS if Indian Company can’t use technical knowledge: ITAT

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  • By Taxmann
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  • Last Updated on 21 December, 2022

Fees for Technical Services; FTS

Case Details: Buro Happold Ltd. v. DCIT - [2022] 145 450 (Mumbai-Trib.)

Judiciary and Counsel Details

    • Aby T Varkey, Judicial Member & M. Balaganesh, Accountant Member
    • Vijay Mehta for the Appellant.
    • Sunil Umap for the Respondent.

Facts of the Case

The assessee was a company registered in the United Kingdom and was a tax resident of that State. During the relevant year, it provided structural and MEP engineering and consultancy services for various buildings and projects in India to Buro India and other clients.

The Assessing Officer (AO) treated the sum received by the assessee as fees for technical services (FTS). The assessee contended that it did not make available any technical knowledge or skill etc and thus the same should be characterized as Business Income falling under Article 7 of the DTAA.

The matter was reached before the Mumbai Tribunal.


The Mumbai Tribunal held that technology is considered to have been made available when the recipient is competent and authorized to use it independently and without relying on the service provider.

To be able to retain and use the technical knowledge, experience, skill, know-how, or processes on their own in their business or for their own benefit, the recipient must receive and retain these resources from the service provider, even after the service has ended. The recipient should then have the freedom to use these technical resources as they see fit.

Undisputedly, in the instant case, the technical design/drawings/plans provided by the assessee to the Indian entity are specific to a particular project and cannot be used by the Indian entity in any future projects. Based on this evidence, it can be concluded that the assessee had not made available any technical knowledge, experience, skill, know-how, or processes while developing and supplying the technical drawings/designs/plans.

Thus, the amount received by the assessee has to be treated as business profit and in the absence of a PE in India, it cannot be brought to tax in India.

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