ITAT provides succor to Infosys BPO

ITAT provides succor to Infosys BPO

The company pleaded that the sum paid by it to the non-resident was not taxable in India

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that the training fee paid by the assessee to a professional trainer would not amount to a 'fee for technical services' as per the relevant Double Taxation Avoidance Agreement (DTAA). This has come as a major relief to Infosys BPO Limited.

The assessee made a payment of 2100 US$ to a non-resident, Stakeholder Centered Coaching, towards the fee on training for developing soft skills.

The assessee contended that the sum paid to the non-resident was not taxable in India. Hence, the assessee should be given a refund of the TDS paid.

A bench of N.V. Vasudevan (vice president) and Chandra Poojari (accountant member) observed that the fee for the provision of service would not be a technical fee unless that special skill or knowledge was required when the service was provided to the customer.

The tribunal maintained, "The employees developing leadership skills through services provided by the non-resident do not use such knowledge when they provide BPO service to the customers of the assessee. Therefore, the service rendered cannot be regarded as a technical service. It 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 must be run."

"Since it relates to only developing leadership skills, it cannot be regarded as a consultancy service also. That is because of the provision of advice by someone, such as a professional who has special qualifications. allowing him to do so, would be a consultancy service. But imparting training in leadership skills cannot be termed as providing advice by a professional," it added.

Relying on the tribunal's decision in the Ershisanye Construction Group India Pvt. Ltd. case, ITAT concluded, "The decisions clearly support the plea of the assessee that the sum paid to a non-resident cannot be regarded as FTS within the meaning of Sec.9(1)(vii) of the Act. So, it cannot be taxed in the hands of the non-resident in India. Consequently, the assessee would be entitled to a grant of refund of taxes paid together with interest as per the law."