Training fee cannot be termed as “fee for technical services”
Training is a continuous process because technology is changing very fast and one needs to keep touch with such technology and therefore, expenses incurred towards training cannot be termed as “fee for technical services”
Case: Lloyds Register Industrial Services (India) Pvt. Ltd. vs. ACIT [ITA No. 940 & 7628/Mum/04]
Court have considered the rival submissions carefully in the light of the relevant material on record as well as the decision cited by the parties. After careful perusal of various authorities relied on either side would show that they are quite distinguishable because none of the case law deals with the training expenses. In these cases some principles have been laid down. Court further find that the decision relied on by the learned counsel for the assessee in the case of Ishikawajima-Harima Heavy industries Ltd. v. Director of Income-tax (supra) is not applicable because that decision has been rendered in respect of section 9(1)(vii)(e) which is applicable in the case of non-residents where as clause (b) deals with residents. However, at the same time, common sense would tell us that training expenses cannot be called as “fee for technical services”. For example a student passes his examination of LL.B., it does not mean he becomes fully equipped to deal with the cases in various fields, He needs further training under a Senior Lawyer in the chosen field say for example – taxation, service matters, civil matters or criminal matters, etc. in the modern days even these categories can be further sub-divided, for example – in the case of taxation, it can be direct taxes and indirect taxes and with further specialization, for example – say International taxation etc. Similarly, civil maters can be divided into various fields say property matters, family matters etc. A person is highly qualified by his law degree but still requires training for rendering practical aspects. Similarly, in the case before court surveyors were highly technically qualified but such persons may need to learn practical aspects of examining various electrical and other equipment. Such training in court view is a continuous process because technology is changing very fast and one needs to keep touch with such technology and therefore, expenses incurred towards training cannot be termed as “fee for technical services”. In any case, the case before us major amount has been paid by way of reimbursement for boarding and lodging arrangements also for which no separate claims have been made. Therefore, according to court, the training fee cannot be termed as “fee for technical services” and no TDS is to be deducted from the same.