Case Law : Payment of Referral fee to foreign concern for services rendered outside India not taxable in absence of PE in India

In a recent decision in the case of Knight Frank (India) Private Limited V/s ACIT, Mumbai , the Hon’ble Mumbai ITAT has held that –

-       Where referral fees was received by foreign concern for introducing clients to assesse – Indian Company, providing international real estate advisory and management services, since referral services were rendered entirely outside India, it would not fall within the scope of ‘total income’ of said foreign concern as per s. 5(2)

-       Referral fees paid by assesse – Indian company for availing referral services which were rendered by a foreign concern entirely in USA would constitute business profits of foreign company under Article 7 of India – USA DTAA,  in absence of PE in India, the same is not taxable in India.”