Virtual Fees for Technical Services Taxability

In Benteler Automotive (China) Investment Ltd. v. ACIT, the Bombay High Court addressed whether technical services rendered remotely from China qualify as taxable “fees for technical services” (FTS) under the India–China DTAA. 

While the petitioner argued that Article 12 requires services to be performed in India, the Revenue countered that virtual delivery suffices and that prior assessments consistently taxed such income.

The Court did not conclusively settle the interpretational issue. 

Instead, it refused to grant a NIL withholding certificate under Section 197, emphasizing that (i) similar income had been taxed in earlier years and appeals were pending, (ii) Section 197 is provisional and guided by past tax positions, and (iii) writ jurisdiction should not pre-empt ongoing appellate proceedings. 

The ruling reinforces procedural restraint over substantive adjudication at the withholding stage.