TaxTMI 
TaxTMI 
2011 (5) TMI 150
X X X X Extracts X X X X
X X X X Extracts X X X X
....any contended that the amounts had been paid to non-resident parties; that it was the business profit of non-resident party and not technical fees; that the non-resident parties did not have any permanent establishment in India and the assessee company was acting as an independent buyer, due to which, the provisions of section 195 of the Act were not applicable on payments made to the non-resident parties for imparting training to its employees for educating them about the salient features of the equipment meant for sale; that under similar circumstances, in assessment year 2003-04, similar payments had been held by the ITAT to be not liable to be treated as fee for technical services, since no technology capable of being used independently, had been made available to the assessee-company. 4. The Assessing Officer, however, was of the view that the assessee was liable to make TDS as per the provisions of the Act, as the payment made towards training expenses fell under the definition of 'fee for technical services' under the provisions of section 9(1)(vii) of the Act and had been utilized for business carried out in India; and that the payment made also fell under the definition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....explain to proposed buyers the salient features of the products imported by it in India/to impart training to the customers to use the equipment. During the course of assessment proceedings before the Assessing Officer it was submitted that in view of applicability of Article 7 of DTAA between India & Germany, the training fee paid cannot be deemed to accrue or arise to the German Companies in India. As per Article 7 of DTAA the profit of an enterprise of a contracting state is taxable in that state unless the enterprise carries on business in the other contracting State through a Permanent establishment situated there. In the present case, the foreign companies do not have any permanent establishment in India in view of which their profits are not taxable in India. The Assessing Officer has quoted the provisions of section 9(1)(vii) of the Act to conclude that the training fees paid to the Foreign Companies outside India is deemed to accrue or arise in India. The Assessing Officer therefore, held that since the assessee has not deducted at source as per provisions of section 195 of the Act, the amount cannot be allowed in view of section 40(a)(i) of the Act. The learned CIT(A) aft....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncy services (including the provision of services of technical or other personnel) but docs not include consideration for any construction, assembly, mining or like project undertaken by the recipient chargeable under the head "salaries". Hon'ble Madras High Court in the case of Skycell Communications Ltd. 251 ITR 53, observed thus: "In the modern day world almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involve the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service." "When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz. an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an ae....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the amount paid as "fees for technical services" within the meaning of Explanation 2 to section 9(1)(vii). The amounts paid are towards annual maintenance contract of certain machinery or for converting POY into textured/twisted yarn. The technology or the technical knowledge of the persons is not made available to the assessee but only by using such technical knowledge services, i.e., rendered to the assessee. In such a case, it cannot be said that the amount is paid as "fees for technical services". Rendering services by using technical knowledge or skill is different than charging fees for technical services. In a latter case, the technical services are made available due to which the assessee acquired certain right which can be further used. In the present case, it is not so. The persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not now vested with the assessee by which itself it can do research work. In the circumstances, the amount paid cannot be considered as fees for technical services within the meaning of section 194J of the Act." Applying the above decision to the present set of facts, we find that what was paid....