Whether commission charged for services can be taxed under the garb of fees for technical services?
Respected Members
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Short note of today's case law for quick reference:
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[2025] 129 ITR (Trib) 39 (Chennai) D – Bench
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Lasers words US Inc.
V.
Deputy Commissioner of Income Tax
(International Taxation)
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Mahavir Singh (Vice President) and Amitabh Shukla (AM)
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10.05.2024?????
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1. The assessee, a non-resident company in India and resident of the U.S.A. was engaged in providing services of e-publishing which fell under information technology enabled services involving software and digital technology.
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2. The assessee had entered into a contract with SPI India which consequently entered into contract with end customers in the U.S.A.
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3. However, the assessee was a not a party to the master service agreement with the customer.
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4. All service contract with customers in the U.S.A. were entered by SPI India which was solely responsible for executing the e-publishing work.
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5. The role of the assessee was limited to liaising with the customers, understanding with their work flow requirements and communication with SPI India which executed the project.
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6. The role of assessee, which received sales commission as percentage of sales from new customers as well as existing customers on monthly basis, was not limited to identification of prospective or new customers in the USA, but once a customer was on board, the assessee interacted with the customer on regular basis to render to customer’s requirements.
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7. Hence, the assessee acted as a front-end contact point for the customer and the role of the assessee involved understanding the customer’s workflow requirements and communicate them to the executives located in SPI India, for which it charged commission on total sales and disclosed this as sales commission.
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8. The nature if such activities could not be equated with fees for included services under Article 12(4)(b) of DTAA between India and USA and hence could not be taxed in India.
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9. It was to be considered as only sales commission & therefore addition deleted.