Relief to Infosys BPO Ltd: Training Fee paid to Non-Resident Professional not amount to FTS, rules ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore, in a major relief to Infosys BPO ltd, held that the training fee paid by the assessee to a professional trainer would not amount to “fee for technical services” as per the relevant double taxation avoidance agreement (DTAA).

The assessee made payment of 2100 US$ to a nonresident viz., Stakeholder Centered Coaching towards fee, training for developing soft skills. The assessee contended that the sum paid to the non-resident is not taxable in the hands of the non-resident in India and therefore the assessee should be given the refund of the TDS paid out of its pocket.

A bench of Shri N.V. Vasudevan, Vice President and Shri Chandra Poojari, Accountant Member observed that 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 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,” the Tribunal said.

Relying on the Tribunal decision in the case of Ershisanye Construction Group India (P) Ltd, the Tribunal concluded that “the decisions rendered as above, clearly support the plea of the assessee the sum paid to non-resident cannot be regarded as FTS within the meaning of Sec.9(1)(vii) of the Act 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. In view of the above conclusion, 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 adjudicated.”

Shri. Padam Chand Khincha, CA appeared for the assessee.

To Read the full text of the Order CLICK HERE

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