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Section 9(1)(vii) – Translation of a text from one language to another is not “technical” in nature, does not fall within the definition of FTS under the Act.
Facts:
The Taxpayer is an India company engaged in the business of providing translation services through the web. For this purpose the Taxpayer availed translation services from translators residing in India as well as outside India.
In respect of fee paid to translators in India, the Taxpayer withheld necessary taxes. However on fee paid to the nonresident (NR) translators the Taxpayer did not withhold tax at source.
The Tax Authority held that the fees paid to the NR translators are technical in nature as per section 9(1)(vii) of the Act and hence was liable to withholding of taxes. Thus the Tax Authority disallowed the payments made to NR translators in computing the business income of the Taxpayer, for failure to withhold the tax at source.
The order of the Tax Authority was upheld by the First appellate Authority. Aggrieved, the Taxpayer appealed before the Tribunal.
Held:
Fee for technical services under the Act is defined to mean any consideration for the rendering of any managerial, consultancy or technical services. The term “technical” is defined by dictionary to mean a service relating to a particular subject, art, craft, or its technique requiring special knowledge to be understood or services involving or concerned with applied and industrial sciences.
In the present case, the Taxpayer is getting the translation of the text from one language to another. The only requirement for translation from one language to the other is the proficiency of the translators in both the language.
Apart from the knowledge of the language, the translator is not expected to have the knowledge of applied sciences or the craft or techniques in respect of the text to be translated. The Translator is not required to contribute anything more to the text that is to be translated nor is he required to elaborate the meaning of the text.
A bare perusal of the definition of FTS under the Act and the dictionary meaning of the word “technical” makes it unambiguously clear that the translation services are not technical in nature. Thus fee paid to NR translators is not FTS u/s. 9(1)(vii) of the Act.
