Tax liability of each partner to be examined under respective DTAA in case of tax transparent entity, legal services not FTS under domestic tax law – Delhi bench of the Tribunal

In brief

In a recent ruling¹ , the Delhi bench of the Income-tax Appellate Tribunal (Tribunal) upheld that for a UK-based partnership firm, which is a fiscally transparent entity, the tax liability of each partner of the firm has to be examined with reference to the Double Taxation Avoidance Agreement (DTAA) with the country of their respective residence. 

Furthermore, the Tribunal has concluded that professional services rendered by specialised professionals are distinct from services that form part of the fees for technical services (FTS) even under the provisions of domestic tax laws.