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Tax Publishers Absence of Fee for Technical Services (FTS) clause in Indo-Thai DTAA - Limitation of benefits clause (LOB) - whether business income and in the absence of a PE (Permanent Establishment) cannot be taxed in India? *Facts:* Assessee a Thai resident was in receipt of certain management and fee for technical services which was claimed not taxable in India due to Treaty override as per Section 90(2) and that since the Indo-Thai DTAA does not have a clause to tax FTS the same would be business income and in the absence of a PE the same cannot be taxed in India at all. This stand was not acceptable to the AO/DRP who held that the assessee had arranged his affairs in a manner to schedule these as FTS to escape the clutches of taxation and hence LOB clause ought to apply to them and the benefit of DTAA would not be available to them also because there was no clause to tax FTS in the Indo-Thai DTAA and hence Section 90(2) cannot be availed at all by the assessee. On higher appeal - Held in favour of the assessee that in the absence of a FTS clause in the Indo-Thai DTAA the same partakes the character of business income and in the absence of a PE in India it cannot be taxable in India. *Applied:* Bangkok Glass Industry Co. Ltd. v. ACIT (2013) 34 Taxman 77 (Mad-HC) : 2013 TaxPub(DT) 0594 (Mad-HC) Paradigm Geophysical Pvt. Ltd. (2010) 25 SOT 94 (Del-Trib) : 2010 TaxPub(DT) 0131 (Del-Trib) Bharti Airtel Ltd. (2016) 67 taxmann.com 223 (Del-Trib) : 2016 TaxPub(DT) 1376 (Del-Trib) *Ed. Note:* The decision to have a clause or to omit a clause in a DTAA is the prerogative of the two treaty negotiating states and the domestic Income tax law cannot be inserted in the absence of a DTAA clause to devoid the gap. The treaty override benefit ought to be given to in all correctness. *Case:* Solvay Asia Pacific Pte. Ltd. v. DCIT (IT) 2024 TaxPub(DT) 440 (Del-Trib)

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Absence of Fee for Technical Services (FTS) clause in Indo-Thai DTAA - Limitation of benefits clause (LOB) - whether business income and in the absence of a PE (Permanent Establishment) cannot be taxed in India?

Facts:

Assessee a Thai resident was in receipt of certain management and fee for technical services which was claimed not taxable in India due to Treaty override as per Section 90(2) and that since the Indo-Thai DTAA does not have a clause to tax FTS the same would be business income and in the absence of a PE the same cannot be taxed in India at all. This stand was not acceptable to the AO/DRP who held that the assessee had arranged his affairs in a manner to schedule these as FTS to escape the clutches of taxation and hence LOB clause ought to apply to them and the benefit of DTAA would not be available to them also because there was no clause to tax FTS in the Indo-Thai DTAA and hence Section 90(2) cannot be availed at all by the assessee. On higher appeal -

Held in favour of the assessee that in the absence of a FTS clause in the Indo-Thai DTAA the same partakes the character of business income and in the absence of a PE in India it cannot be taxable in India.

Applied:

Bangkok Glass Industry Co. Ltd. v. ACIT (2013) 34 Taxman 77 (Mad-HC) : 2013 TaxPub(DT) 0594 (Mad-HC)

Paradigm Geophysical Pvt. Ltd. (2010) 25 SOT 94 (Del-Trib) : 2010 TaxPub(DT) 0131 (Del-Trib)

Bharti Airtel Ltd. (2016) 67 taxmann.com 223 (Del-Trib) : 2016 TaxPub(DT) 1376 (Del-Trib)

Ed. Note: The decision to have a clause or to omit a clause in a DTAA is the prerogative of the two treaty negotiating states and the domestic Income tax law cannot be inserted in the absence of a DTAA clause to devoid the gap. The treaty override benefit ought to be given to in all correctness.

Case: Solvay Asia Pacific Pte. Ltd. v. DCIT (IT) 2024 TaxPub(DT) 440 (Del-Trib)