Sales commission for overseas marketing was not fee for technical services or included services under the India-USA treaty.

Sales and marketing commission earned for promoting products, coordinating with foreign customers and following up collections was not taxable as fee for technical services under the Act because the activities were neither technical, managerial nor consultancy in nature and did not involve making available any technical knowledge, skill or know-how. The same income also did not fall within fees for included services under Article 12 of the India-USA DTAA, as the functions were comparable to export marketing and agency services. The taxability addition was deleted.

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Issues: Whether sales commission received by a non-resident assessee for marketing and promoting products/services outside India was taxable in India as fee for technical services under the Act and as fees for included services under Article 12 of the India-USA DTAA.

Analysis: The commission-related activities were confined to promoting products, coordinating with customers in foreign markets, and following up for collections. These functions did not amount to technical, managerial, or consultancy services. The services did not involve advice or decision-making assistance, and the assessee did not make available any technical knowledge, experience, skill, know-how, or process to the Indian entity. The nature of the services was comparable to export marketing and agency functions, which have consistently been held outside the ambit of section 9(1)(vii) and outside the treaty definition of fees for included services. The reopening and other ancillary grounds were not argued.

Conclusion: The sales and marketing commission was not taxable as fee for technical services under the Act and did not constitute fees for included services under the India-USA DTAA. The taxability addition was deleted, and the appeal was partly allowed.

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