Payment by Indian Entity to its AE Abroad not ‘FTS’ in absence of availability of Technical Skill: ITAT rules in favour

The ITAT ruled in favor of Herbalife International India, stating that payments made by an Indian entity to its associated enterprise (AE) abroad are not considered Fees for Technical Services (FTS) under the Income Tax Act if there is no availability of technical skill. The case involved payments for services such as business promotion and market research. \r

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Herbalife argued that these services did not require technical expertise, thus should not be taxed as FTS. The ITAT agreed, noting the absence of technical skill or knowledge in the services provided by the AE, aligning with the provisions of the Income Tax Act and international taxation principles.