Principal-to-principal income sharing is not commission under section 194H, while cross-border training payments need factual verification.
Payments for foreign training, examination and certification were not finally determined to be fees for technical services because the record did not conclusively show the trainers' stay in India or satisfaction of the make available test, so the matter was remitted for fresh verification and the assessee could prove that the trainers stayed less than 90 days. By contrast, amounts paid to the Indian service provider were treated as contractual sharing of income or profit on a principal-to-principal basis, not commission for services rendered on another's behalf, so section 194H did not apply and the related disallowance was deleted.
Issues: (i) Whether the payments for training, examination and certification to the foreign entity were taxable in India as fees for technical services and liable to TDS, and whether the matter required verification of the stay period of the trainers in India; (ii) Whether the amounts paid to the Indian service provider under the agreement were commission liable to deduction of tax at source under section 194H or only a sharing of income/profit on a principal-to-principal basis.
Issue (i): Whether the payments for training, examination and certification to the foreign entity were taxable in India as fees for technical services and liable to TDS, and whether the matter required verification of the stay period of the trainers in India.
Analysis: The training and examination arrangement was treated as educational training in welding-related activities. The record before the Tribunal did not conclusively establish the exact days spent in India by each trainer, though the assessment order did not prima facie show any trainer exceeding the relevant threshold. The agreement placed before the Tribunal was also insufficient to finally determine whether technical services were actually rendered and whether the make available test was satisfied.
Conclusion: The issue was remitted to the Assessing Officer for fresh adjudication, with liberty to the assessee to prove that the trainers stayed for less than 90 days and that the payments were not fees for technical services.
Issue (ii): Whether the amounts paid to the Indian service provider under the agreement were commission liable to deduction of tax at source under section 194H or only a sharing of income/profit on a principal-to-principal basis.
Analysis: The agreement showed a method of demarcation of fees collected and provided for invoicing by the assessee for sharing of income under the agreed schedule. On that footing, the payments were not commission for services rendered on behalf of another person, but a contractual sharing of profit/income between independent parties.
Conclusion: Section 194H was held inapplicable and the disallowance on this count was deleted.
Final Conclusion: The assessee succeeded on the commission issue, while the issue relating to taxability of the foreign training payments was restored for reconsideration. The appeal was therefore allowed in part and the remaining relief was only for statistical purposes.
Ratio Decidendi: A payment structured as contractual sharing of income between independent parties is not commission within section 194H, and where taxability of cross-border training payments depends on unresolved factual questions, the matter may be remitted for verification.
TaxTMI 
AI Drafter ✕
TaxTMI 
