Fees for technical services under the India-UK DTAA depend on whether technical know-how is actually made available.

Under Article 13(4)(c) of the India-UK DTAA, fees for technical services arise only where technical knowledge, experience, skill, know-how or processes are made available, or where there is development and transfer of a technical plan or design. On Project TS 0102, the foreign enterprise's vehicle appraisal, testing, ADAMS modelling and training activities involved creating and sharing a model, documenting it for the Indian company, and training its engineers, so the payment fell within the treaty definition and was taxable. On Project TS 0105, independent evaluation of the Rombo motorcycle did not involve any such making available, so the payment was outside the definition and not taxable.

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Issues: (i) Whether the amount paid under Project TS 0102 for vehicle appraisal, testing, ADAMS modelling and training constituted fees for technical services taxable in India under Article 13(4)(c) of the India-UK DTAA. (ii) Whether the amount paid under Project TS 0105 for independent evaluation of the Rombo motorcycle constituted fees for technical services taxable in India under Article 13(4)(c) of the India-UK DTAA.

Issue (i): Whether the amount paid under Project TS 0102 for vehicle appraisal, testing, ADAMS modelling and training constituted fees for technical services taxable in India under Article 13(4)(c) of the India-UK DTAA.

Analysis: The project documentation showed that the foreign enterprise was required not merely to test vehicles, but also to create a 2-dimensional ADAMS model, document it, make it available to the Indian company, encourage active participation of its engineers, and provide training in the test techniques and procedures used to create and validate the model. These features brought the payment within the treaty definition of fees for technical services because technical knowledge, experience, skill, know-how and processes were made available to the recipient.

Conclusion: The payment under Project TS 0102 was taxable as fees for technical services and the addition was rightly sustained, against the assessee.

Issue (ii): Whether the amount paid under Project TS 0105 for independent evaluation of the Rombo motorcycle constituted fees for technical services taxable in India under Article 13(4)(c) of the India-UK DTAA.

Analysis: The objective of this project was only an independent evaluation of the motorcycle before launch. The record did not show any development and transfer of a technical plan or design, nor any making available of technical knowledge, experience, skill, know-how or processes to the Indian company. The payment therefore did not satisfy the treaty requirement in Article 13(4)(c).

Conclusion: The payment under Project TS 0105 was not taxable as fees for technical services and the related addition was deleted, in favour of the assessee.

Final Conclusion: The treaty definition of fees for technical services governed the dispute, and only the payment involving actual making available of technical knowledge and training was taxable, while the independent evaluation payment was outside that category.

Ratio Decidendi: Under Article 13(4)(c) of the India-UK DTAA, technical or consultancy services are taxable as fees for technical services only when they make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or design.

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