Sharing of management experience and business strategies by a foreign professional cannot be termed as technical service under India-USA tax treaty

Facts

ISSUE NO. I

• The assessee was an Indian company engaged in the business of manufacturing pharmaceuticals. It paid USD 80,000 to a non-resident named C.K. Prahlad Inc. (“CKP Inc.) of USA without withholding any tax at source thereon. CKP Inc. of USA was a company incorporated under laws of the USA. CKP Inc. had sent one of its professionals (Mr. C.K. Prahlad), being a management guru, to India for a period of two days to address the conference on future strategy which was held for the benefit of the employees of the assessee.
• The assessee claimed that since CKP Inc. did not make available any technical knowledge to it, the amount paid was not ^„fee for included services^‟ within the meaning of the term under Article 12 of India-USA Double Taxation Avoidance Agreement (“tax treaty”) and thus was not taxable in India in the hands of CKP Inc. Further, in the absence of CKP Inc. having a permanent establishment (“PE”) in India, this amount is also not chargeable to tax in India as business income under Article 7 of the India-USA tax treaty.
• The Assessing Officer (“AO”) held that the assessee was required to deduct tax at source from the remittances of USD 80,000 made to CKP Inc. of USA under section 195 of the Income-tax Act, 1961 (“the Act”). The Commissioner (Appeals) upheld the decision of the AO. The assessee preferred an appeal before the Tribunal.