The overseas sales commission received from Associated...

The overseas sales commission received from Associated Enterprises (AEs) does not constitute 'Fees for Technical Services' (FTS) u/s 9(1)(vii) of the Income Tax Act, as the services rendered are neither managerial nor consultancy in nature. The assessee company is a champion of indigenously developed technology in India, supplying to global customers with locally developed and globally registered patents. The associated entity performs pure sales functions, connecting potential customers and introducing the assessee to them, while the assessee predominantly handles the remaining activities. The Assessing Officer erroneously treated the overseas sales commission as FTS without appreciating that the associated entity does not render services resulting in FTS or make available technical knowledge. Relying on the case of DCIT v. Welspun Corporation Ltd, it was held that commission paid to non-resident export commission agents for highly technical products does not change the character of the sales agent's activity, as the object is to sell, and familiarity with technical details is only towards that end. Consequently, the impugned payment received by the assessee is commission on sales and marketing services and cannot be treated as FTS u/s 9(1)(vii) of the Act. The levy of interest u/ss 234A and 234B is consequential and mandatory.