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Management Support Services vis-à-vis Ancillary and Subsidiary Clause – An Analysis on position under Treaties
Introduction:
The concept of Fees for Technical Services (for brevity ‘FTS’) or Fees for Included Services (for brevity ‘FIS’) is a subject matter for constant litigation. The main reason for the litigation is because of the definition of FTS/FIS differs among Income Tax Act (for brevity ‘ITA’) and treaties. Added to this layer of confusion, is that such definition varies from treaty to treaty. Further, there are no hard and fast rules to consider a particular service as FTS/FIS and every transaction has to be decided on facts of each case which results in multiple interpretations and long drawn litigation for FTS/FIS.
It is known fact, that multinational groups companies incorporate a subsidiary in India and provides various management or business support services to its subsidiary company in India to ensure effective and efficient maintenance of business operations in India.
These services inter alia include finance, accounting, group taxation, engineering, human resources, marketing and strategic planning, management support, legal etc. (referred as ‘management support services’/’MSS’).