India: Management and consultancy services provided virtually from China not taxable as fees for technical services under treaty (tribunal decision)

The Delhi Bench of the Income Tax Appellate Tribunal held that fees received by a taxpayer for rendering managerial and technical services virtually from China were not taxable as fees for technical services (FTS) under the India-China income tax treaty.

The taxpayer, a tax resident of China, provided management and consultancy services to its Indian group company virtually from China and entirely from outside India. The tax authority argued that fees received by the taxpayer for such services were FTS taxable in India under the treaty because the place where the services are utilized, rather than the place from where the services are rendered, determines the taxability of such services. The tax authority also argued that the services provided virtually through emails, conference calls, and video conferencing were equivalent to the physical rendition of services in India.

The tribunal held that services must be rendered in India to be treated as FTS under the treaty and providing services virtually through emails, conference calls, and video conferences cannot be regarded as services physically rendered in India.

Read an October 2026 report prepared by the KPMG member firm in India, which also includes summaries of the following developments:

• Delhi Tribunal held that a U.S. taxpayer did not have a fixed place permanent establishment (PE) or dependent agent PE (DAPE) in India under the India-USA income tax treaty because the Indian subsidiary's premises were not at the taxpayer's disposal and the transactions were on a principal-to-principal basis.
• Delhi Tribunal held that a share buy-back by an Indian company from its Dutch parent company at face value was not taxable as capital gains in India under the India-Netherlands income tax treaty.
• Delhi Tribunal held that a Singapore-based taxpayer was entitled to a concessional tax rate of 5% on interest earned on rupee-denominated non-convertible redeemable debentures (NCDs) under section 194LD of the Income-tax Act, 1961.
• Supreme Court held that Category-III Alternative Investment Funds (AIFs) cannot be deemed indeterminate trusts solely due to the absence of investors' names in the trust deed at the execution date.
• Madras High Court held that a tax officer’s failure to conduct a proper inquiry into the taxability of accrued interest on the premature conversion of debentures into equity shares rendered the tax authority’s reassessment order erroneous and prejudicial.
• Ahmedabad Tribunal held that following a demerger, the original cost of shares held as stock-in-trade must be apportioned between the retained shares and the optionally convertible debentures received, rather than retain the pre-demerger cost.
• Kolkata Tribunal held that section 50CA of the Income-tax Act, 1961, cannot be applied to compute the income in the hands of shareholders when the buy-back of shares is exempt under the buy-back tax regime.
• Gujarat High Court held that the assignment of leasehold rights in industrial plots does not constitute a taxable supply subject to goods and services tax (GST).
• Gujarat High Court held that when a head office did not issue tax invoices to its branches for common corporate expenses, the value of such services must be treated as nil, meaning no GST liability arose.
• Reserve Bank of India amended the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective October 1, 2026, to reduce export proceeds realization periods and empower authorized dealer banks to handle legacy transactions.