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2023 (1) TMI 261 - AT - Income TaxFees for technical services’ (‘FTS’) - sum received from HR and Marketing Consultancy services and Employee Training services as chargeable to tax in India as ‘fees for technical services’ - India-Sweden DTAA - assessee contended that since it rendered Managerial and Training services to its two Indian AEs, the amount did not fall within the ambit of FTS under the DTAA read with DTAA between India and Portuguese - HELD THAT:- Managerial services along with technical and consultancy services are also covered within the ambit of FTS. It is not the case of the assessee that the receipt is not taxable under the Act. The assessee has made out a case that the sum is not chargeable to tax in the hue of the DTAA, which is more beneficial than the provisions of the Act and section 90(1) of the Act permits choosing a more beneficial provision. If the amount in question also falls within the definition of the ‘fees for included services’ under the DTAA - In order to `make available’ technical services, it is sine qua non that the recipient of the services must acquire such technical knowhow etc. which he himself can use in future without any assistance of the provider and the same should not be anything which vanishes or disappears with its provision by the payee itself. Adverting to the facts of the extant case, we find from the nature of services rendered by the assessee that these are primarily pertaining to Human Resources, Marketing Consultancy services and Training services etc. Obviously, managerial services are not part of Article 12(4) of the DTAA between India-Portuguese. As regards the other services, it can be seen that such services are albeit laced with some technical knowledge and lead to their sharing during the training etc., but do not “make available” any technical knowledge, know-how, experience, skill etc. to the Indian entities so as to apply it in future without any aid or assistance from the assessee. The conclusion drawn by the AO is not proper because the training simply advances the skill of the recipient-employees but falls short of providing any technical knowledge, experience, skill that enables the employees “to apply the technology contained therein”. As such, we hold that that decision of the AO in treating Rs.38.16 lakh as FTS, is not correct because such consideration does not fall within the purview of FTS under Article 12(4) of the DTAA read with Article 12(4) of the DTAA between India- Portuguese. This addition is directed to be deleted. Addition of claimed to be reimbursement of expenses - We find that though the assessee made out a case of reimbursement but could not successfully prove the same before the AO. AR submitted that the assessee has got all the relevant documents and can prove the same before the AO. Under the given circumstances, we set-aside the impugned order and remit the matter to the file of the AO for giving one more opportunity to the assessee to prove that sum was in the nature of reimbursement in the terms discussed above. Needless to say, the assessee will be allowed reasonable opportunity of hearing. Treating as income chargeable to tax, as against the assessee’s contention of the same being recovery of expatriates’ salary cost - A perusal of the mandate of the above provision clearly ingrains that any amount paid as a consideration which is income of the recipient chargeable to tax under the head “Salaries”, cannot constitute FTS. Though the assessee has been arguing before the authorities below that the said amount of Rs.64.19 lakh was offered by the employees for taxation in India as their salary, but did not furnish any conclusive evidence to prove the same. It can be seen from the impugned order that the assessee filed certain details of the salaries paid by the employees but did not establish any correlation between the amount under consideration and the amount offered for taxation as `Salary’ by such employees - we are of the considered opinion that it would be in the fitness of the things if the impugned order on this score is set-aside and the matter is remitted to the file of the AO. We order accordingly and direct him to decide this issue afresh as per law after allowing reasonable opportunity of hearing to the assessee. Appeal is partly allowed.
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