Market research reimbursement not treated as fees for technical services where no technical knowledge was made available.

Reimbursement of market research es to a non-resident was treated as outside the scope of fees for technical services because the arrangement showed only a share of research expenditure, not technical assistance rendered to the payer. The correspondence and research report indicated a market research exercise, and the treaty test of "make available" was not satisfied since no technical knowledge, experience, skill or know-how was passed on to the payer. As the payment was not taxable in the hands of the non-resident, the basis for treating the payer as the non-resident's agent also failed, and the consequential interest exposure under section 234B did not survive.

---

---

Issues: Whether the remittance made by the assessee to the non-resident towards market research expenses was chargeable as fees for technical services and whether the assessee was liable to be treated as an agent of the non-resident with consequential tax and interest liability.

Analysis: The payment was found to arise from the parties' arrangement for market research and to represent the assessee's share of the expenditure incurred for that purpose. The surrounding correspondence and the research report showed that the exercise was confined to market research and did not establish that technical assistance was rendered to the assessee in a manner that converted the payment into fees for technical services. The Tribunal also held that the amount was in substance reimbursement of expenses. In any event, the Tribunal accepted the assessee's contention that the services did not make available technical knowledge, experience, skill or know-how to the assessee within the treaty meaning of fees for technical services. On that basis, the amount was not taxable in the hands of the non-resident, and the foundation for treating the assessee as an agent of the non-resident failed. The liability to interest under section 234B was therefore also negated.

Conclusion: The remittance was not fees for technical services and was not chargeable to tax in the hands of the non-resident; the assessee was not liable as agent, and no interest under section 234B survived.

Final Conclusion: The assessee succeeded on the substantive tax issue, with the agent-based assessment and consequential interest demand set aside.

Ratio Decidendi: A reimbursement of market research expenses does not become fees for technical services merely because the recipient undertook the research, and under the treaty such services are taxable only if they make available technical knowledge, experience, skill or know-how to the payer.

---