TaxTMI 
TaxTMI 
2021 (1) TMI 211
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....tocol thereto. 3. Succinctly, the assessee is a Sweden based company who filed its original return declaring total income of Rs. 4.05 crore, being interest received on ECB loans. The assessee received, inter alia, a sum of Rs. 22,43,630/- from Sandvik Asia Private Limited (SAPL) towards Training charges. The same was designated as Training fees (Non-technical services) not chargeable to tax as "fees for technical services" in India under the DTAA read with the Protocol as expanding to the DTAA between India and Portuguese. On being called upon to substantiate its stand, the assessee submitted copies of sample invoices indicating rendition of `Human Resource and Leadership training' to three employees of SAPL. The assessee emphasized that the Leadership training services imparted by it enabled the recipients to manage the affairs of its Indian affiliate more effectively and hence the managerial services rendered by it did not fall within the meaning of Article 12 of the DTAA between India and Portuguese. The AO did not accept the assessee's contention of the latter's entitlement to the limited scope of the term `fees for technical services' as given in the India and Portuguese Tax ....
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....become immune from taxation? 5. We will espouse the above questions ad seriatim for consideration and decision. Before proceeding further, we want to clarify that the AO as well as the DRP, in holding the amount of Training fee as chargeable to tax as FTS, have relied on the view taken by the DRP for the immediately preceding year in the assessee's own case. The ld. AR candidly admitted that the unfavorable view bolstered by the DRP for the assessment year 2013-14 was accepted by the assessee without any further assail albeit because of smallness of the amount. This factor, in our considered opinion, is not either way decisive of the fate of the issue currently under consideration of the Tribunal. I. Whether benefit of India Portuguese DTAA can be allowed in terms of MFN clause in the Protocol to India Sweden DTAA? 6. The assessee received a sum of Rs. 22,43,630/- from SAPL for imparting `Human resource leadership training' to three of the employees of SAPL, which was claimed as not chargeable to tax in view of the Protocol and the resultant DTAA between India and Portuguese not covering `Managerial' services within the ambit of the FTS. Relying on the Perfetti Van (supra), th....
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.... as under:- "Royalties and Fees for Technical Services 1. ... 2. Notwithstanding the provisions of paragraph (1) such royalties and fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services. 3. (a) (b) The term "fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention. 4. to 6. ....". 9. When we construe the meaning of the term `fees for technical services' as given in para 3(b) of Article 12 of the DTAA, it is manifested that the same includes, inter alia, consideration for managerial services, which is contrary to the assessee's stand. That appears to be the reason propelling the assessee to invoke Protocol to the DTAA, relevant part of w....
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....case that Training fee is in nature of consideration for `managerial' services, so as to find an escape route from the definition of fees for technical services and the consequential taxation. 12. In order to decide whether the Training fees, in the given facts, is a consideration for managerial services, it is sine qua non to first comprehend the real nature of services rendered by the assessee, a Sweden company to three employees of SAPL. Copies of three invoices raised by the assessee for this purpose have been placed at pages 105 to 107 of the paper book which are pointer to the fact that the assessee rendered Training to Mr. Sunil Joshi vide invoice dated 27-03-2014; Mr Rajender Dhiman vide invoice dated 27-03-2014; and Mr. Nishar Imam vide invoice dated 22-05-2013. Sum of these invoices total up to the amount under consideration. In the Description column of the first two invoices, it has been mentioned "Programfee ONE SLP 7". In the third invoice, the Description has been given as "Programfee ONE SLP 4". On being called upon to provide a copy of the Agreement under which such services were rendered, the ld. AR submitted that no formal agreement was entered into for the purp....
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.... instance, acquainting someone in a formal manner with techniques to boost sales does not stand at par with rendering marketing services. Rendition of marketing services takes place when marketing activities are actually undertaken for and on behalf of an organization by practically plunging into the field or doing some activity concerning the marketing. In fact, doing the activity is synonymous with rendering of service of that nature. Simply equipping or enabling the others for doing an activity is a step anterior to rendition of such services. 14. Coming to the context under consideration, the case of the assessee - that it imparted leadership training to three employees of SAPL, which, in turn, helped them in managing the affairs of SAPL in a better way and hence, it rendered managerial services to SAPL - in our considered opinion is not correct. We are constrained to hold that rendering leadership training to employees of SAPL cannot be said as rendering managerial services so as to fall outside the ambit of fees for technical services under Article 12 (3) of the DTAA between India and Sweden read with its Protocol and the resultant Article 12 of India and Portuguese treaty. ....
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....ancy services. If a patient goes to a doctor and consults him of his illness, he is consulting a doctor. Similarly, if a client goes to an Advocate and seeks his opinion, he can be considered as availing consultancy services from the Advocate. However, what is pertinent to note here is that the common connotation of Consultancy services as noticed herein does not hold good in the context of the language of Article 12 of the DTAA between India and Portuguese. Even a cursory reading of para 4 of Article 12 of India Portuguese Convention deciphers that the clause (b) is attached to both the technical and consultancy services. Thus the `Consultancy services' in the present context would not be of the nature as understood commonly, but draw their colour from the items mentioned after the term `make available', more specifically, when these are also comprehended in the sense of making available experience or skill etc. to the recipient for using it at his own end. This shows that the technical knowledge, experience or skill etc., must be handed over to the acquirer for its later use by self as a pre-condition for falling within the purview of this Article. 17. Coming back to the factual....
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....hrough a permanent establishment as defined in Article 5. In such a scenario, the profits of the enterprise of Sweden may be taxed in India but only so much as are attributable to its permanent establishment in India. 19. Returning to the factual panorama of the case, we find that the assessee characterized the receipt of Training fee as a consideration for `managerial' services within the overall ambit of Article 12 and the Revenue also accepted the same as falling under that Article but as `consultancy or technical' service. We have held supra that the Training fee received by the assessee does not fall within the purview of Article 12 of the DTAA with Portuguese inasmuch as it is neither fees for managerial services on one hand nor consultancy or technical services on the other. Thus, the taxability of the same is required to be tested within the meaning of Article 7 read with Article 5 of the DTAA. Since such an exercise of examining the case under Article 7 has not been undertaken by the AO, we would have ordinarily remitted the matter to the AO for its de novo adjudication. 20. However, it is noted that the assessee received total sum of Rs. 41.82 crore from its associated ....