ITAT: Payment for Project-Specific Architectural and Consultancy Services Not FTS Sans ‘Make Available’; No TDS Liability

The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that the payment for consultancy and architectural and structural design does not qualify as Fees for Technical Services (FTS) under the DTAA, requiring no tax deduction.

The case started when the Assessing Officer claimed that the payments made by the assessee, Forum Homes Private Limited, to two Singapore-based companies for consultancy and architectural and structural design should be treated as FTS under Section 91(vii) of the Income Tax Act, read with Article 12(4) of the India-Singapore Double Taxation Avoidance Agreement (DTAA). Since the assessee had not deducted tax at source on the payments, the AO made a disallowance of the amount paid under section 40(a)(i) of the Income Tax Act.

The assessee argued that the services were project-specific and did not transfer any technical knowledge or skill. Further, the consultancy services for the architectural design and drawing will no longer be in use once the project is finished.

The Tribunal agreed with the company’s view, observing that the services were project-specific. Also, the designs could not be reused for other projects, and no technical knowledge or skills were “made available” to the assessee company for independent use. Therefore, the conditions of Article 12(4) of the India-Singapore DTAA were not fulfilled.

The ITAT relied on its earlier decision for the previous year, where a similar issue was decided in favour of the taxpayer. As a result, the Tribunal held that these payments were not FTS and therefore not taxable in India.