Enclosed AAR rules business support services to group entities under cost contribution arrangement is FTS.
In the recent ruling of the Authority for Advance Rulings (AAR) in the case of the Applicant (Shell India Marketing Pvt Ltd) on the issue of taxability of business support services received from its group company in the UK, under a Cost Contribution Arrangement (CCA). The AAR held that the services would be regarded as fees for technical services (FTS) under the India–UK Double Taxation Avoidance Agreement (UK DTAA) and the Indian Tax Laws and, consequently, would be taxable in India.
The AAR, in the present ruling, has taken a broad view of the expression ‘consultancy services’ as including even provision of business support services, since the CCA indicated that advice would be provided to the Applicant. It has also held that provision of such services satisfies the requirement of ’make available’ that is present in some DTAAs, such as the UK DTAA, since the Applicant would be in a position to derive enduring benefit. It also held that such services would be taxable as FTS, even though it was a cost-sharing arrangement in which the group entity only recovered its costs.
In the recent ruling of the Authority for Advance Rulings (AAR) in the case of the Applicant (Shell India Marketing Pvt Ltd) on the issue of taxability of business support services received from its group company in the UK, under a Cost Contribution Arrangement (CCA). The AAR held that the services would be regarded as fees for technical services (FTS) under the India–UK Double Taxation Avoidance Agreement (UK DTAA) and the Indian Tax Laws and, consequently, would be taxable in India.
The AAR, in the present ruling, has taken a broad view of the expression ‘consultancy services’ as including even provision of business support services, since the CCA indicated that advice would be provided to the Applicant. It has also held that provision of such services satisfies the requirement of ’make available’ that is present in some DTAAs, such as the UK DTAA, since the Applicant would be in a position to derive enduring benefit. It also held that such services would be taxable as FTS, even though it was a cost-sharing arrangement in which the group entity only recovered its costs.
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