Technical training fees treated as fees for technical services, making the payment taxable in India and subject to withholding.

Structured technical training of technical and managerial personnel by a non-resident was analysed as fee for technical services because the programme imparted technical knowledge, experience, skill and know-how for use in the assessee's Indian business. On that basis, the payment was treated as falling within section 9(1)(vii) of the Income-tax Act and article 13(4)(c) of the India-UK DTAA, because the training made available technical knowledge and expertise. The fee was therefore deemed to accrue and arise in India, became taxable in India under the treaty framework, and attracted deduction of tax at source under section 195.

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Issues: Whether the payment of training fees by the assessee to a non-resident company for training its technical and managerial personnel in the United Kingdom constituted fees for technical services, making the amount chargeable to tax in India and requiring deduction of tax at source.

Analysis: The training programme was structured and technical in character, covering operational, engineering, maintenance, management and process-control aspects of steel manufacture. The services involved imparting technical knowledge, experience, skill and know-how to the assessee's personnel so that such expertise could be used in its business in India. On that basis, the payment fell within the scope of fee for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and also satisfied article 13(4)(c) of the India-UK DTAA, as the training made available technical knowledge, experience and skill. The fee was therefore deemed to accrue and arise in India and was taxable in India under the treaty framework.

Conclusion: The training fee was correctly treated as fee for technical services, and deduction of tax at source under section 195 was rightly directed.

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