TaxTMI 
TaxTMI 
TaxTMI 
TDS and International Transactions: Categorization of Payments under the ambit of "royalty" or "fees for included services (FTS)"
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....ound the categorization of payments made by the assessee to its US-associated enterprise (US-AE). The primary question was whether these payments constituted "royalty" or "fees for included services" under the India-US Double Taxation Avoidance Agreement (DTAA) and whether the assessee had a TDS liability under Section 195 of the Income Tax Act. Section 195 of the Income Tax A....
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...., it was essential to establish whether the payments were for the use of intellectual property rights. Fees for Included Services: Article 12(4) of the DTAA introduces the concept of "fees for included services," encompassing payments for services that make available technical knowledge, experience, skill, know-how, or processes. Distinguishing between services and "fees for includ....
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....'s categorization of payments, it was pivotal to determine whether TDS liability under Section 195 would apply. The ITAT's finding that the payments did not fall within the definition of "royalty" or "fees for included services" had significant implications. Conclusions and TDS Implications: Based on the detailed analysis: * The payments made by the assessee to US-....
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....ents as neither "royalty" nor "fees for included services" under the DTAA, the decision relieves the assessee from the obligation to withhold tax at source on these payments. This has substantial financial implications, as non-compliance with TDS provisions could lead to penalties and legal consequences. Furthermore, this case underscores the importance of a precise interpreta....