INCOME TAX ACT, 1961

Section 9(1)(vii)

Income deemed to accrue or arise in India - Under section 9(1)(vii) - Fees for technical services - Provision of telephone connectivity service

AO held that amounts received by assessee-foreign company from Indian customers during the year, were towards fees for technical services as per provisions of section 9 and India-UK DTAA. The assessee submitted that it provided connectivity service, which was a part of provision of standard telephone service available across the globe and revenue generated from it, did not qualify as fees for technical services as it did not provide any technical knowledge, skill, etc. Assessee further submitted that by rendering the connectivity services, it did not enable its Indian customers to apply the technology used by it in providing such services and that, there was no human intervention and in absence of human intervention, payments could not be characterized as fees for technical services. Held: Constant human endeavor or human intervention is essential requirement for treating the rendering of services as 'technical'. If any technology or a process has been put to operation automatically, wherein it operates without much human interface or intervention, then such technology per se cannot be held as rendering of technical services by human skills. Where there is a standard facility made available for public at large, without giving any special or exclusive services, whether to a particular client or class of clients, then it cannot be brought within the ambit of technical services as stipulated in Explanation 2 to section 9(1)(vii). Hence, Tribunal was justified in holding that revenue earned by assessee, was only for a service rendered and was not in the nature of making any technology available to the persons receiving the service and accordingly, the same could not be taxable as fees for technical services.

Relied:CIT-4, Mumbai v. Kotak Securities Ltd. (2016) 383 ITR 1 (SC) : 2016 TaxPub(DT) 1609 (SC) and CIT International Taxation-1 v. Alibaba.Com Singapore E-Commerce (P) Ltd. [ITXA No. 212 of 2018] : 2023 TaxPub(DT) 4032 (Bom)