India: Taxability determined separately for each partner, based on applicable treaty (tribunal decision)
Taxability in India determined separately for each partner of UK-based fiscally transparent partnership, based on applicable treaty
The Delhi Bench of the Income Tax Appellate Tribunal held that taxability in India must be determined separately for each partner of a UK-based fiscally transparent partnership, based on the applicable income tax treaty with the partner’s country of residence.
Accordingly, while UK resident partners were entitled to treaty benefits under the India-UK income tax treaty, the non-UK resident partners were entitled to claim benefits under the treaty between India and their respective country of residence.
The tribunal further clarified that legal services constituted professional services and were distinct from technical or consultancy services. Consequently, such services did not fall within the ambit of fees for technical services (FTS) under the Income-tax Act, 1961 or the relevant income tax treaties, when the applicable treaties specifically excluded professional services from the scope of FTS.
The case is: Herbert Smith Freehills LLP v. CIT (Appeals) (ITA 2281/Del/2019)
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