Categories: Income Tax

tax on fees for technical services

STANDBY MAINTENANCE CHARGES (FIXED IN NATURE) RECEIVED BY A NR IS NOT CHARGEABLE AS ‘FEES FOR TECHNICAL SERVICES‘ WITHIN THE SCOPE OF SECTION 9(1)(VII). – TAX ABILITY OF FEE FOR TECHNICAL SERVICES (FTS)

 

Flag Telecom Group Ltd. v. DCIT  (Mumbai – Trib.) [2015]

FACTS

The assessee had built a high capacity submarine optic fiber telecommunications link cable system and had sold the capacity in the said cable system to various landing parties including VSNL in India under capacity sales agreements.

The Construction and Maintenance Agreement (C&MA) was separately entered between the parties in terms of which the FLAG cable system was to be jointly operated and maintained in efficient working condition along with FLAG and landing parties signatories.

In the year under consideration, the assessee received certain sum from VSNL on account of provision of standby maintenance activities. ]

The Assessing Officer held that receipts from standby maintenance services/charges were in the nature of ‘fees for technical services’ within the meaning of section 9(1)(vii) and, hence, it was to be taxed accordingly in India.

On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.

RULING

It is not in dispute that the standby charge is a fixed annual charge, which is payable not for providing or rendering services albeit for arranging standby maintenance arrangement, which is required for a situation whenever some repair work in undersea cable or terrestrial cable is actually required to be performed or rendered.

It is a facility or infrastructure maintained for ready to use for rendering the technical services or for repairing services, if required.

There is no actual rendering of the services qua the standby maintenance charges. It is not the case of the Assessing Officer or the Commissioner (Appeals) that standby maintenance charge is on account of actual repair or maintenance carried out by the assessee.

Hence, following the earlier years’ precedence, the receipt on account of standby maintenance charges is not chargeable as ‘fees for technical services’ within the scope of section 9(1)(vii).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480

Rajput Jain & Associates

Rajput Jain & Associates is a Chartered Accountants firm, with it's headquarter situated at New Delhi (the capital of India). The firm has been set up by a group of young, enthusiastic, highly skilled and motivated professionals who have taken experience from top consulting firms and are extensively experienced in their chosen fields has providing a wide array of Accounting, Auditing, Taxation, Assurance and Business advisory services to various clients and their stakeholders. Rajput jain & Associates, a professional firm, offers its clients a full range of services, To serve better and to bring bucket of services under one roof, the firm has merged with it various Chartered Accountancy firms pioneer in diversified fields. We have associates all over India in big cities. All our offices are well equipped with latest technological support with updated reference materials. We have a large team of professionals other than our Core Team members to meet the requirements of our prospective clients including the existing ones. However, considering our commitment towards high quality services to our clients, our team keeps on growing with more and more associates having strong professional background with good exposure in the related areas of responsibility.

Recent Posts

New cheque clearing process starting from Oct 4, 2025

New cheque clearing process in India starting from October 4, 2025 Existing System (Until Oct 3, 2025) : Clearing Method:… Read More

1 day ago

Overview on Tax Treatment on Gratuity in India

Overview on Tax Treatment on Gratuity in India What is Gratuity? Gratuity is a lump sum paid by an employer… Read More

1 day ago

Taxation Comparison: Gold Coin vs Gold Jewellery

Taxation Comparison: Gold Coin vs Gold Jewellery Tax Aspect Gold Coin Gold Jewellery ITR Reporting Treated as a capital asset.… Read More

4 days ago

Crypto Taxation & ITR Reporting Guide for India

Crypto Taxation & ITR Reporting Guide Tax on Profits from Crypto (Virtual Digital Assets)- Taxation U/s 115BBH Applicability on Virtual… Read More

4 days ago

Savings Account Rules for Transactions to Avoid Tax Scrutiny

Savings Account – Rules for Transactions to Avoid Income Tax Scrutiny The Income Tax Department monitors high-value transactions through banks’… Read More

4 days ago

Quick Guide on GST Marginal Scheme

Quick Guide on GST Marginal Scheme What is GST Marginal Scheme Meaning : The GST Margin Scheme is applicable primarily… Read More

4 days ago
Call Us Enquire Now