TaxTMI 
TaxTMI 
2009 (11) TMI 670
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.... CIT(A), has erred in holding that the training expenses of the surveyors paid to Lloyds Register of Shipping London, are in the nature of as fees for technical services in terms of section 9(1)(vii) of the Act and thereby in disallowing the sum of Rs. 19,01,162 under the provisions of section 40(a)(i ) of the Income-tax Act, 1961. He ought not to have done so." 3. As regards ground No. 1, we find that during the proceedings, the Assessing Officer had noticed that assessee had incurred training expenses amounting to Rs. 56,34,250 which mainly consisted of travelling, lodging and boarding abroad. He made reference to reasonableness of expenditure and ultimately held that expenditure was excessive and after excluding the travelling cost, he disallowed 50 per cent of the balance of this expenditure. 4. On appeal, the learned CIT(A) was of the view that whole of the training expenses were in the nature of fee for technical services and since no tax has been deducted the whole of the expenditure was not allowable under section 40(a)(i ) and accordingly, he issued a notice for enhancement and ultimately disallowed a sum of Rs. 42,24,291 after excluding the expenses incurred for travell....
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....icer noticed that assessee had claimed expenses of Rs. 56,34,250 towards training cost. He further found that as per the claim the expenses included stay and travel cost. According to him the cost of stay was much higher and thus the expenses were on higher side. After excluding the travel expenses amounting to Rs. 9,88,000 he disallowed 50 per cent of the balance of expenses amounting to Rs. 23,23,129. 9. On appeal, CIT(A) was of the view that perusal of the detail filed would show that training expenses were in the nature of fee for technical services and would be thus covered by section 9(1)(vii)( b) of the Act and accordingly, he issued enhancement notice. 10. In response to the notice it was mainly submitted before him that training expenses could not be equated with fee for technical services because it involved one party using its own skill to perform services for another without any transfer of that skill. It was submitted that assessee was engaged in the survey of ships whereby assessee's employees would inspect various mechanical and electrical equipments in the ship and ultimately issue a fitness certificate. By taking training from principal company, such employees ha....
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....e same could not be brought under section 9(1)(vii) of the Act in view of the decision of the Hon'ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 . He also relied on the following decisions :- (i) CIT v. Siemens Aktiongesellschaft [2009] 310 ITR 320 (Bom.). (ii) Mahindra & Mahindra v. Dy. CIT [2009] 313 ITR 263 (Mum.) (SB). (iii) Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791 (Mum.). 13. On the other hand, the learned Departmental Representative strongly supported the orders of the lower authorities. He also placed reliance on the decisions relied on by the learned CIT(A). 14. We have considered the rival submissions carefully in the light of the relevant material on record as well as the decision cited by the parties. After careful perusal of various authorities relied on either side would show that they are quite distinguishable because none of the case law deals with the training expenses. In these cases some principles have been laid down. We further find that the decision relied on by the learned counsel for the assessee in the case of Ishikawajma-Harima Heavy Industries Ltd. (supra) is not applicable because that decision ha....
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....cts and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that reimbursement of the training expenses to the surveyors, are in the nature of as fees for technical services in terms of section 9(1)(vii) of the Act and thereby erred in disallowing the sum of Rs. 2,12,162 considering it as payment to non-residents without deduction of tax under the provisions of section 40(a)( i) of the Income-tax Act. He ought not have done so." 18. After hearing both the parties, we find that the assessee had claimed total training expenses at Rs. 12,04,149 out of which only a sum of Rs. 5,31,676 was incurred on foreign training. After allowing the expenses in respect of travelling vis-a-vis fee, etc., the balance amount of Rs. 2,13,213 was treated as fee for technical services and subjected to tax which has been confirmed by the learned CIT(A). 19. This issue has been adjudicated by us in above noted appeal of the assessee in ITA No. 940/M/08 wherein we have held that training expenses cannot be construed as fee for technical services. Therefore, following that decision, we set aside the order of the learned CIT(A) and delete the addition. 20. In the result, th....