Managerial services provided by a foreign entity to an Indian subsidiary are not taxable as Fees for Technical Services under the India-UK DTAA, affirming the need to follow precedents unless overturned.

JUDGMENT

V. KAMESWAR RAO, J.

1. This petition has been filed challenging an order dated 09.06.2025 and certificate dated 30.07.2025 issued by the respondent/Revenue, whereby the application of the petitioner/assessee under Section 197 read with Section 195 (3) of the Income-tax Act, 1961 (the Act, hereinafter) seeking issuance of a „Nil Withholding Certificate‟ has been rejected.

2. The petitioner is a company incorporated under the laws of the United Kingdom, and is engaged in the business of providing international education across the globe. The petitioner has a subsidiary in India, Nord Anglia Education India Pvt. Ltd. (Nord India, hereinafter), to which the petitioner extends routine management and administrative support services, including marketing and communication, human resources, finance, IT, and corporate development, which are subsequently recovered on a strict cost-to-cost basis without any markup.

3. According to Dr. Shashwat Bajpai, learned counsel for the petitioner, the services rendered by the petitioner are purely managerial in nature and do not partake the character of Fees for Technical Services (FTS) under Section 9(1)(vii) of the Act. More importantly, under Article 13 of the India–UK DTAA, only technical or consultancy services that make available technical knowledge, skill, or know-how are taxable. Managerial services are outside its scope. The services of the petitioner do not make available any such technical knowledge to its Indian affiliates, and as such, the consideration received by it is not taxable in India.

4. According to him, the Income Tax Appellate Tribunal (the Tribunal, hereinafter) in the case of the petitioner itself for the Assessment Years (AY) 2020-21 and 2021-22, categorically held that the consideration received for services in the nature of marketing and communications, human resources, commercial, corporate affairs, legal, finance, information technology, and facilities management/corporate development, rendered to Nord India, would not be taxable as FTS in terms of the provisions of the India–UK Double Taxation Avoidance Agreement (DTAA). Despite the findings in these orders and detailed submissions made by the petitioner in response to the queries raised by the assessing officer, the respondent has mechanically passed the impugned order, stating that the issuance of a „Nil rate certificate‟ would be premature, and that tax @15% must be withheld “to protect the interest of revenue.”

5. He stated that this action violates the statutory mandate of Rule 28AA of the Income-tax Rules, 1962 (the Rules) as well as the law laid down by this Court while disposing of similar petitions. Rule 28AA of the Rules is reproduced as under:

“28AA.

Certificate for deduction at lower rates or no deduction of tax from income other than dividends.

28AA (1) Where the Assessing Officer, on an application made by a person under subrule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of subsection (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub- rule (1) shall be determined by the Assessing Officer after taking into consideration the following:—

(i) tax payable on estimated income of the previous year relevant to the assessment year;

(ii) tax payable on the assessed or returned