ITAT Rules FTS Not Taxable Under Thailand Residuary DTAA Article

The Delhi ITAT held that fees for technical services received by a Thai company from Indian group entities could not be taxed under the residuary “Other Income” article of the IndiaThailand DTAA merely because the treaty does not contain a specific FTS provision. 

The Tribunal ruled that Article 22 cannot be invoked as a default charging provision and that such receipts must instead be examined under Article 7 dealing with business profits. Since the assessee did not have a Permanent Establishment in India, the receipts were held to be non taxable in India and the addition was deleted. 

The ruling provides important guidance on treaty interpretation and reinforces that, in the absence of a PE, technical service receipts may escape Indian taxation where the applicable DTAA does not contain an FTS article.