Foreign cos' services under brand names to be taxable: ITAT

Foreign firms may now get wary of letting Indian companies use their brand name as the income from providing technical solutions under overseas companies' brands could call for a tax liability, going by a recent tribunal ruling.

The Income Tax Appellate Tribunal (ITAT) in a recent ruling has said the Indian arm of German company Hutarew & Partner is liable to pay tax deducted at source (TDS) on the licence fee paid to the parent company for technical services.

"If services have been used by the assessee within India, then it is immaterial whether the non-resident has a residence or place of business or business connection in India as the sum paid to the non-resident would be included in the income, which will be deemed to have accrued to the non-resident and it will be subject to TDS provisions," the tribunal ruled.

The Indian arm of Hutarew provides consultancy services for setting up power projects and had paid licence fee for using the Hutarew brand name and data-processing charges.

However, the Indian company, which availed of the data-processing services, had failed to deduct tax at source on both types of payments.

The tribunal in its order dismissed the appeal of the company that the fees paid to the German company were not for technical services.