Seminar / conference / Training expenses paid to Associated Entity - Whether taxable as FTS? - Indian Income Tax Perspective

Seminar / conference / Training expenses paid to Associated Entity - Whether taxable as Fees for Technical Services? 

Dear All,

Recently the Hon'ble Mumbai ITAT in case of Roche Diagnostics India Private Limited, has decided and put up the matter to rest. Payment / reimbursement of Seminar / conference / Training expenses to AEs shall not be taxable as Fees for Technical services subject to certain conditions been taken care of. 

(Please refer the hyperlink mentioned in name of the matter for the complete judgement)

The facts of the Case, Assessee's contention and the Hon'ble ITAT's judgement is summarised below. 

Facts of the Case:

• Assessee has made payments to AEs in Singapore an Germany, in relation with participation of employees in Conferences / Seminar in Hongkong and Singapore.

• The Assessee had not deducted TDS on the said remittances, and the AO, disallowed the said expenditure on the ground of non-deduction of tax at source.

Assessee’s contention before ITAT

• No income can be said to accrue / deemed to accrue in for a conference held outside India

• Payment can be characterized as FTS only when a person pays to another a payment for renderaing services which is in nature of consultancy / technical / managerial in nature. Professional services are not covered under definition of Fees for Technical services.

• The payment made to AE should be classified as business income; and in absence of PE, should not be subject to tax in India.

 

ITAT’s observation

• Agreeing to the above contention of the Assessee, held that As per the DTAA, consideration shall be taxable as FTS only when technical knowledge, skills, etc. is made available to the recipient of services.

• In current case, the AEs have not made available the technical knowledge / skills, and hence payment made to AE are not liable to tax in India. Accordingly the question for TDS on the above payment do not arise.

• Further in another reimbursement (Other than for payment for seminar, etc.) , the ITAT had referred to form 15CA / CB where the payments were clearly termed as reimbursements.

Trust you have found the same insightful. In case of any query / comments, do let me know in comments below.