Where the importer hire the services of an overseas agent for carrying inspection of import consignment to ensure that the imports are received in India in time and in correct quantity and quality without any independent application of thought process would be short of the meaning of fees for technical services under Explanation 2 to clause (vii) in section 9 (1) of the Act.
The Bangalore bench of ITAT in Jeans Knit (P) Ltd. V. Dy CIT, International Taxation (2012) 53SOT76 is pointer to elementary nature of services that does not involve skill application or knowledge application and that which can be carried out without employing skilled personnel would be short of the character as FTS under Income tax Act provided such services are carried out at the behest and as per the directions of the resident payer.
In terms of payments to non-residents and their WHT implications much would depend on the written contract terms to judge whether they would represent the character of FTS under the Income tax Act. If these do not match all the three tests of independent skill application, direction or control of activity and application of thought process, they would merit exemption from WHT.
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