Fees for technical services test under the India-Singapore treaty failed where consultancy only produced a market study report.

Consultancy payments for preparation and updation of a market study were not fees for technical services under Article 12(4)(b) of the India-Singapore tax treaty because the services did not make available technical knowledge, skill, know-how or processes to the recipient. Mere data processing or delivery of a report, without transfer of technical capability, did not satisfy the treaty test, so tax was not deductible at source under section 195. The payer was therefore entitled to refund of tax deducted, together with interest under section 244A. The rule of consistency could not override the correct legal position.

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Issues: Whether the consultancy payments made to the non-resident for market study and updation were fees for technical services under Article 12(4)(b) of the India-Singapore tax treaty so as to require deduction of tax at source under section 195, and whether the assessee was entitled to refund of tax deducted with interest under section 244A.

Analysis: The payment was for preparation and updation of a market study based on available data, and the record did not show that the services involved any technical knowledge, skill, know-how or process that was made available to the assessee. The relevant treaty provision covered consultancy services only when they made available technical knowledge, experience, skill, know-how or processes enabling the recipient to apply the technology contained therein. A mere processing of data or delivery of a report, without transfer of technical capability, did not satisfy that test. In these circumstances, the consultancy charges could not be treated as fees for technical services taxable in India, and the rule of consistency could not override the correct legal position.

Conclusion: The consultancy payment was not taxable as fees for technical services, deduction at source was not warranted, and the assessee was entitled to refund of the tax deducted together with interest under section 244A.

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