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TMI Blog2022 (9) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... e run but relates only developing leadership skills and hence the service provided by the non-resident cannot be regarded as managerial services. It cannot be regarded as consultancy service also because provision of advice by someone, such as a professional, who has special qualifications allowing him to do so, would be consultancy service but imparting training in leadership skills cannot be said to be providing advice by a professional. Assessee in the case of Ershisanye Construction Group India (P) Ltd. [ 2017 (8) TMI 736 - ITAT KOLKATA] , the tribunal had to deal with taxability of training fee paid to non-resident, being a tax resident of Republic of China - The definition of FTS under the DTAA between India and China and under the Act was identical. Assessee the sum paid to non-resident cannot be regarded as FTS within the meaning of Sec.9(1)(vii) and cannot be taxed in the hands of the non-resident in India. Consequently, the assessee would be entitled to grant of refund of taxes paid together with interest thereon as per law. The question of rate of tax to be deducted on payments made to non-resident in terms of Sec.206AA of the Act becomes academic and hence not adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present appeal, the training was provided by the non-resident through online. The paper book filed by the assessee contains quotation given by the non-resident. The nature of the service to be provided by the non-resident is described as Leadership Growth Progress Review mini survey. The Purchase order given by the assessee to the non-resident has the description of the service as Fee, Training for Soft Skills Leadership Growth Progress Review Mini Survey. Admittedly the non-resident does not have a Permanent Establishment or any presence in India and is a tax resident of Hong Kong. The nature of remittance as described in Form No.15CB by the Chartered Accountant before effecting remittance has the following description, viz., TRAIN-THE COACH CERTIFICATION WORKS . It is thus clear that the nature of services is impart training in developing leadership skills. The business of the Assessee is rendering BPO services and in rendering those services, the leadership skills imparted by the non-resident would not or cannot be used. It is in this context that the OECD Report on e-commerce titled Tax Treaty Charaterization Issues arising from e-commerce, wherein the nature of FTS in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly involve the provision of the use of, or access to, data and software (see, for example, categories 7, 8, 9, 11, 13, 15, 16, 20 and 21 in annex 2). The service of making such data and software, or functionality of that data or software, available for a fee is not, however, a service of a technical nature. The fact that the development of the necessary data and software might itself require substantial technical skills is irrelevant as the service provided to the client is not the development of that data and software (which may well be done by someone other than the supplier) but rather the service of making the data and software available to that client. For example, the mere provision of access to a troubleshooting database would not require more than having available such a database and the necessary software to access it. A payment relating to the provision of such access would not, therefore, relate to a service of a technical nature. Managerial services 43. The Group considers that services of a managerial nature are services rendered in performing management functions. The Group did not attempt to give a definition of management for that purpose but noted that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2009) 318 ITR 185 (Del) and Skycell Communications Ltd. (supra)]. 25. Thus, the technical services consists of services of technical nature, when special skills or knowledge relating to technical field are required for their provision, managerial services are rendered for performing management functions and consultancy services relate to provision of advice by someone having special qualification that allow him to do so. In the present case, the aforesaid requisites and required necessities are not satisfied. Indeed, technical, managerial and consultancy services may overlap and it would not be proper to view them in water tight compartments, but in the present case this issue or differentiation is again not relevant. 8. His submission was that the training in soft skills could not fall either within the term technical, managerial or consultancy services . He pointed out that the services rendered by non-resident cannot be termed as consultancy service. The fact that technology is used in providing a service is not indicative of whether the service is of a technical nature. Similarly, the delivery of a service via technological means does not make the service technical. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reaty. Tribunal also held that leadership training provided by assessee to employees of an Indian company did not result in making available any technical knowledge, experience or skill etc. to said employees which could enable them to use it later on, thus, such training fee could not be considered as FTS for rendering consultancy or technical services. Matter remanded for re-adjudication. (AY. 2016 -17 ) 2. EEE Sandvik AB v. Dy. CIT (2021)85 ITR 593 /187 ITD 638 / 210 TT3 1019/201 DTR 172 (Pune)(Trib) S. 9(1)(vii):Income deemed to accrue or arise in India - Fees for technical services Non-Resident -Leadership training provided to employees of group company - Training fees cannot be assessed as fees for technical services - As there is no permanent establishment in Income cannot be assessed - DTAA -India-Sweden Art, 5, 7, 12(b)1 Tribunal held that the leadership training provided by the assessee did not result in making available any technical knowledge, experience or skill, to the employees of the Indian company, which could enable them to use it later on. The Assessing Officer was not justified in considering the training fee as a consideration for rendering consultancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in the present case, clearly shows that the services rendered by non-resident cannot be termed as technical service for the mere reason that technology is used in providing service. The delivery of a service via technological means does not make the service technical. Special skill or knowledge may be used in developing or creating inputs to a service business. The fee for the provision of a service will not be a technical fee, unless that special skill or knowledge is required when the service is provided to the customer. The employees developing leadership skill through service provided by the non-resident do not use such knowledge when they provide BPO service to the customers of the assessee and hence, the services rendered cannot be regarded as technical service. The service cannot be regarded as managerial service because the service rendered by the non-resident does not teach the employees of the assessee how the business has to be run but relates only developing leadership skills and hence the service provided by the non-resident cannot be regarded as managerial services. It cannot be regarded as consultancy service also because provision of advice by someone, such as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees for technical services has been defined in Explanation 2 to section 9(1)(vii). [Para 7] ■ In the present case, the assessee is getting the translation of the text from one language to another. The only requirement for translation from one language to other is, the proficiency of the translators in both the languages, i.e. the language from which the text is to be translated, to the language in which it is to be translated. The translator is not contributing anything more to the text which is to be translated. He is not supposed to explain or elaborate the meaning of the text. Apart from the knowledge of the language, the translator is not expected to have the knowledge of applied science or the craft or the techniques in respect of the text which is to be translated. ■ A bare perusal of Explanation 2 to section 9(1)(vii), which explains fees for technical service and the dictionary meaning of the word technical makes it unambiguously clear that translation services rendered by the assessee are not technical services. Therefore, the payment made by the assessee to the non-resident translators would not fall within the scope of fees for technical, manageri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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