Held
The services rendered by the foreign university to the applicant involve expertise in or possession of special skill or knowledge that is ‘technical’ in nature. Thus the payment for the services falls under the definition of FTS, both under the Act and the tax treaty. However, the case of the applicant will fall in the exclusion clause of Article 12(5)(c) of the tax treaty which reads as under - “Notwithstanding paragraph 4, ‘Fees for technical services does not include payment: for teaching in or by educational institutions..”
There is no dispute regarding the fact that the foreign university is an educational institution and services rendered are in the nature of ‘teaching’. Thus the payments are not considered as FTS under the tax treaty.
Further the AAR held that the foreign university does not have a PE in India under Article 5(1) or 5(8) of the tax treaty in relation to the activity of conducting in-class teaching or through tele-presence in India.
Thus the payments were not chargeable to tax in India and there will not be any withholding tax implications.
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