Sales commission for marketing services not treated as technical fees under Indian tax law and the India-USA DTAA.

Sales commission for marketing and promotional services was held not taxable in India as fees for technical services. The activity was characterised as that of an authorised business partner facilitating promotion and procurement of orders, rather than technical, managerial or consultancy services, so it did not satisfy section 9(1)(vii) of the Income-tax Act, 1961. The commission also fell outside Article 12 of the India-USA DTAA because the make available condition was not met. The decision followed earlier coordinate bench rulings in the assessee's own case and the payer's case on identical commission receipts, resulting in the issue being decided in favour of the assessee.

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Issues: Whether sales commission received for marketing and promotional services was taxable in India as fees for technical services under the Income-tax Act, 1961 and Article 12 of the India-USA DTAA.

Analysis: The sales and marketing activity was held to be that of an authorized business partner facilitating promotion and procurement of orders, and not technical, managerial, or consultancy services. The services did not satisfy the statutory definition of fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961, and also did not fall within Article 12 of the India-USA DTAA because the requisite make available condition was not satisfied. The decision followed the earlier coordinate bench rulings in the assessee's own case and in the payer's case, which had taken the same view on identical commission receipts.

Conclusion: Sales commission was not taxable in India and the issue was decided in favour of the assessee.

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