Fees for technical services: repair receipts through deputed experts were held taxable, with no DTAA business-profits exemption.

Amounts paid for repair work carried out through technical experts deputed by a foreign enterprise were treated as fees for technical services under the Income-tax Act and the India-Japan DTAA. The court held that the treaty expression "technical services" should be read consistently with domestic tax law, and that the arrangement was not a mere supply of personnel but a composite technical operation undertaken by the enterprise itself through its technicians. The later treaty wording referring to technical personnel was regarded as clarificatory. The receipts were therefore not industrial or commercial profits exempt in the absence of a permanent establishment and were taxable in the hands of the assessee.

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Issues: Whether amounts paid for repairs undertaken through technical experts deputed by a foreign enterprise were chargeable as fees for technical services under the Income-tax Act and the India-Japan DTAA, and whether such receipts were exempt as industrial or commercial profits in the absence of a permanent establishment.

Analysis: The relevant treaty term "technical services" was to be understood in the sense in which domestic tax law used it. The payment was not for a bare supply of personnel. The invoice, no-objection certificate, and surrounding documents showed that the foreign enterprise undertook the repair work itself through its technical experts and charged for the entire technical operation. A composite arrangement for carrying out technical work through technicians engaged by the enterprise falls within the ordinary meaning of technical services. The later treaty definition referring to technical personnel was treated as clarificatory and consistent with that meaning. The receipts therefore did not qualify as industrial or commercial profits exempt under the DTAA.

Conclusion: The receipts were taxable as fees for technical services and were not exempt under the DTAA; the question was answered in favour of the Revenue and against the assessee.

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