Payment For Technical Services Made For Earning Future Source Of Income Outside India Is Covered By The Source Rule Exclusion Under The Act

Mumbai Income Tax Appellate Tribunal (ITAT) in the case of Kotak Mahindra Bank Ltd. ('the Assessee'), dealt with the issue of whether fees paid by the Assessee to a UK LLP for legal services in relation to acquisition of a banking company and setting up of a US branch is covered by the source rule exclusion applicable to royalty and fee for technical services ('FTS') under the Income-tax Act, 1961 ('the Act'). Furthermore, ITAT also dwelled upon the issue of whether payment for such services would be governed by Article 15 of Double Taxation Avoidance Agreement between India and UK ('the Tax Treaty') dealing with Independent Personnel Service ('IPS') or Article 13 dealing with royalty and FTS.