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2022 (9) TMI 111 - AT - Income TaxIncome deemed to accrue or arise in India - FTS - amounts payable to the non-resident after grossing up - Payment for training services - India does not have a DTAA with Hongkong - fees paid to non-residents for training services - whether payment by the assessee to the non-resident can be regarded as a fee for technical services (FTS) within the meaning of Explanation to section 9(1)(vii)? - HELD THAT:- Fee for the provision of a service will not be a technical fee, unless that special skill or knowledge is required when the service is provided to the customer. Employees developing leadership skill through service provided by the non-resident do not use such knowledge when they provide BPO service to the customers of the assessee and hence, the services rendered cannot be regarded as technical service. The service cannot be regarded as managerial service because the service rendered by the non-resident does not teach the employees of the assessee how the business has to be run but relates only developing leadership skills and hence the service provided by the non-resident cannot be regarded as managerial services. It cannot be regarded as consultancy service also because provision of advice by someone, such as a professional, who has special qualifications allowing him to do so, would be consultancy service but imparting training in leadership skills cannot be said to be providing advice by a professional. Assessee in the case of Ershisanye Construction Group India (P) Ltd. [2017 (8) TMI 736 - ITAT KOLKATA], the tribunal had to deal with taxability of training fee paid to non-resident, being a tax resident of Republic of China - The definition of FTS under the DTAA between India and China and under the Act was identical. Assessee the sum paid to non-resident cannot be regarded as FTS within the meaning of Sec.9(1)(vii) and cannot be taxed in the hands of the non-resident in India. Consequently, the assessee would be entitled to grant of refund of taxes paid together with interest thereon as per law. The question of rate of tax to be deducted on payments made to non-resident in terms of Sec.206AA of the Act becomes academic and hence not adjudicated - Appeal by the assessee is allowed.
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