Assessee  is  in business of providing software solutions and services to various industries. It entered into marketing agreement with a non-resident company located in Dubai for marketing its products in Middle East Asian countries.  Agreement specified that assessee will train resources of marketing partner to provide pre-sale and after sale product services to customers and marketing partner will retain 25 per cent of project value as charges for rendering services. Assessing Officer held  that services rendered by marketing partner were in nature of fees for technical services (FTS) as per Explanation 2 to section 9(1)(vii) and having noticed that assessee had remitted charges for rendering services to marketing partner without deduction of tax at source under section 195 disallowed payment made to marketing partner applying provisions of section 40(a)(i). Order is affirmed by CIT(A).On appeal the Tribunal held that  since assessee was in business of providing software solutions and services to various industries, said services definitely required technical expertise and knowledge.  When marketing partner provided pre-sale services and post-sale services to customers, employees of marketing partner should be expertise in technical knowledge of products. Therefore the  services rendered by marketing partner would come under FTS as per Explanation 2 to section 9(1)(vii) of the Act. Since services rendered by marketing partner were in nature of FTS, assessee ought to have deducted tax at source in terms of section 195 and since assessee failed to deduct tax at source, said payment had been rightly disallowed under section 40(a)(i) of the Act. (AY. 2016-17)