• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
January 5, 2023

Training costs for employees that include both general and soft skill cannot be considered as Fees for Technical Service

Training costs for employees that include both general and soft skill cannot be considered as Fees for Technical Service

Fact and Issue of the case

The impugned demand against the assessee stem from the fact that the assessee paid an amount of Rs.141 .75 Lacs to another Singapore based entity i.e., M/s Standard Chartered Bank. The payment was pursuant an agreement whereby the assessee group established a training center in Singapore to impart soft skill training like leadership skills, communication etc. A group wanting to avail the services could recommend the selected employees to undergo the training which is mainly through online portal. This is stated to be general training on soft skill and on general topics like basis of banking etc. which may be useful in general to employees getting training but the same would not have any specific relation to the work being done by them. Accordingly, it was submitted that there was no transfer of technology and the training was not in the nature of transfer of technical skill etc. The ‘make available’ clause as prescribed in Article‑ 12 of India-Singapore Double Taxation Avoidance Agreement (DTAA) would not be satisfied since the services acquired by the recipient should enable him to apply the technology therein which was not the case here. Further, Article-7 provides that business income would be taxable in India only if the payee has permanent establishment (PE) in India. Since the payee does not have any PE in India, there was no obligation of TDS as mandated u/s 195. However, rejecting assessee’s submissions, Ld. AO held that the services were technical services which would require TDS u/s 195. Accordingly, impugned demand was raised against the assessee.

Observation of the Tribunal

It is admitted position that the services are availed by the assessee for its employees to improve their soft skill in the areas of leadership and general management which is not specific to functions being performed by the employees. This training may improve the skills of the employees but it does not involve transfer of any technology which is made available to the assessee for its future use. In terms of Article-12 of DTAA, ‘fees for technical services’ include managerial, technical or consultancy services if such services are ancillary and subsidiary to the application or enjoyment of the right, property or information or it make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein or it consist of the development and transfer of a technical plan or technical design but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. We find that the services as availed by the assessee is covered in none of these clauses. Therefore, the assessee could not be obligated to deduct TDS on the same. The cited decision of Ahmedabad Tribunal rendered on similar factual matrix squarely supports the case of the assessee. Accordingly, the impugned demand could not be sustained. We order so. No other ground has been urged before us.


The appeal is ruled in favour of the department stating that payment of Fees for training to Employees on soft skill & general topics cannot be treated as Fees for Technical Services

Enter your email address:

Subscribe to faceless complainces

Please follow and like us:
Pin Share
Follow by Email