HR, Marketing Consultancy Services, and Employee Training Services are not chargeable to Tax in India FTS: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench has held that HR, Marketing Consultancy services, and Employee Training services are not chargeable to tax in India as Fees for Technical Services (FTS).

The appellant, Alfa Laval Corporate AB,is a company incorporated in Sweden, which is an investment and IP holding company of the Alfa Laval Group. During assessment proceedings, the Assessing Officer noticed that an amount of Rs.38.16 was not offered for taxation. The AO treated the amount as Fees for Technical Services (FTS).The appellant remained unsuccessful before the Dispute Resolution Panel (DRP) and hence the AO made addition of the amount to the total income.

Before the ITAT the counsel for the appellant submitted that the amount of Rs.38.16 lakh did notchargeable to tax in the light of Article 12 of the India-Sweden Double Taxation Avoidance Agreement (DTAA) read with the Protocol for importing Article 12 of the DTAA between India and Portuguese, as an OECD member nation, having a more restricted scope of Fees for Technical Services (FTS).

The Tribunal observed that the nature of services rendered by the appellant pertaining to Human Resources, Marketing Consultancy services, and Training services, etc., such services are albeit laced with some technical knowledge and lead to their sharing during the training, etc. Thus,the conclusion drawn by the AO is not proper because the training simply advances the skill of the recipient-employees but falls short of providing any technical knowledge, experience, or skill that enables the employees “to apply the technology contained therein”.

The Coram of Mr. R.S. Syal, Vice President,and Mr.ParthaSarathi Chaudhury, Judicial Member has held that “we hold that that decision of the AO in treating Rs.38.16 lakh as FTS, is not correct because such consideration does not fall within the purview of FTS under Article 12(4) of the DTAA read with Article 12(4) of the DTAA between India-Portuguese. This addition is directed to be deleted”.

Mr. AlisagarRampurawala and Mr. ShubhakantSahu appeared on behalf of the appellant and respondent respectively.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates