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Recently, the Chennai Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of the Velti India Pvt. Ltd. (the taxpayer) held that payment for bulk SMS to a non-resident carrier (i.e. a mobile communications company) does not amount to Fees for Technical Services since such services do not require any technical knowledge/skill. It does not have involvement of human intervention. Further, such services were rendered outside India and no part of the payment was chargeable to tax in India. Accordingly, the taxpayer is not required to withhold any tax while making such payments.
The Tribunal also held that service charges received in advance for the services to be rendered in future are not liable to tax in the year of receipt.