ITAT: Management Fee not Taxable as FTS under India-Singapore DTAA

The assessee which is a Singapore-incorporated and Singapore-tax-resident company, executed on 01.01.2016 a Management Services Agreement with some Keller Group entities within the Asia-Pacific region. The agreement covered services such as strategic management consultancy, legal services, engineering and technical advice, marketing and advertising, human capital, procurement and IT services.

The assessee offered income from IT services to tax on its own, but the Assessing Officer treated the remaining management fee as Fee for Technical Services (FTS) under section 9 and Article 12 of the India-Singapore DTAA, holding that technical knowledge/skills were being made available. The Dispute Resolution Panel upheld the draft order.
It was argued that except for IT services, the services rendered were only advisory and consultancy in nature and did not involve transfer of know-how or technology enabling the Indian affiliate to apply the same independently. The Department argued that the scope of services in the agreement, supplemented by periodic visits, showed transfer of know-how and satisfaction of the “make available” clause.

Issue Before ITAT: Whether management fee received under the Management Services Agreement was taxable as Fee for Technical Services under Article 12 of the India-Singapore DTAA in absence of “make available” of technical knowledge, skill or know-how.

ITAT’s Decision: The court observed that the agreement was perpetual and that the assessee continued to provide services every year, indicating that there was no one-time transfer of technical knowledge. It held that neither the agreement nor the evidence showed that technical knowledge or know-how was “made available” to Keller India. Advisory or consultancy input alone, it held, did not meet the test of Article 12(4)(b) of the India-Singapore DTAA.

Therefore, the addition treating management fees as FTS was deleted. On other issues the ITAT held that interest u/s 234A was deleted as the return was filed on 10.03.2022 within the extended due date of 15.03.2022 per CBDT Circular 1/2022. Interest u/s 234B was held to be consequential. The Assessing Officer was directed to verify refund adjustment of Rs. 2,26,437 and recompute demand accordingly. The appeal was partly allowed on 26.08.2025.

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