The Tax Publishers2021 TaxPub(DT) 0242 (Pune-Trib) : (2021) 085 ITR (Trib) 0593


Section 9(1)(vii) Section 143(3) Article 12

The leadership training provided by the assessee did not result in making available any technical knowledge, experience or skill, etc., to the employees of SAPL, which could enable them to use it later on in that view of the matter, it is held that the Revenue authorities were not justified in considering training fee as a consideration for rendering Consultancy or technical services within the meaning of article 12(4)(b) of the DTAA between India and Portuguese.

Double taxation avoidance - Agreement with portuguese - Fees for technical services -

Assessee was a Sweden based company. It 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 Treaty. AO opined the services rendered by the assessee to be in the nature of managerial technical or consultancy services within the meaning of para 3(b) of article 12 of the DTAA. More specifically, he held the services to be technical in nature, which made available the technical knowledge. To sum up, he held the training fees received by the assessee from its Indian affiliate as 'fees for technical services' taxable under Article 12 of the DTAA. That is how, a sum of Rs. 22,43,630 was added by the AO to the assessee's total income in the final assessment order and taxed as fees for technical services at 10%. Held: There was a substance in the contention of the assesssee that once two sovereigns have added Protocol to the DTAA between India and Sweden, which contains the Most Favoured Nation (MFN) clause, inter alia, qua Article 12, the sequitur was that the beneficial provisions contained in the DTAA between India and Portuguese is to be read in the DTAA between India and Sweden. The view point of the AO in this regard is ex consequenti vacated. The case of the assessee before the authorities below had been that the Training fee is a consideration for 'Managerial services' and going by the Protocol to the DTAA read with the DTAA between India and Portuguese, the fee for managerial services does not fall within the scope of article 12. Crux of the training given by the assessee to the emloyees of SAL was that the same was in the realm of leadership skills. Plea of the assessee has been that Since the object of the training imparted by the assessee to SAPL employees was to develop leadership qualities leading to better management of SAPL affairs, it rendered managerial services, which were outside the purview of Article 12 of the DTAA read with the Protocol. 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 was not correct. Consultancy or Technical services within the meaning of article 12(4)(b) of the DTAA between India and Portuguese.

REFERRED : Perfetti Van Melle Holding B.V., In Re (2012) 342 ITR 200 (AAR) : 2012 TaxPub(DT) 727 (AAR), Re Steria (India) Ltd. 2014 364 ITR 381 (AAR) : 2014 TaxPub(DT) 2227 (AAR), Steria (India) Ltd. v. CIT & Anr. (2016) 386 ITR 390 (Del) : 2016 TaxPub(DT) 3521 (Del-HC) and Perfertti Van Melle Holding. B.V. v. AAR (2014) 52 161 (Del).

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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