Management fees paid to hong kong co- whether fts?

CA Hariprasad Nayak (Chartered Accountant) (221 Points)

31 January 2016  

Hi All,

A Company incorporated in Hong Kong is being paid management fees (Cost plus 5%) by one of its group company in India. Though the consideration paid for services rendered are termed as Management Fees, we do not think it is Fees for Technical Services (FTS) as per the income tax Act, as there is no element of any value add to the receipient. These services help the receipient greatly in relation to routine and regular conduct of business and not in the management.

The problem is the Co is in Hong Kong and that country does not have a DTAA with India. Can anybody favor me with any case law which states that this is not taxable in India? An early reply is highly appreciated.

Regards,

CA Hariprasad Nayak