Automated testing without human intervention was not technical services, so the remittance escaped tax deduction.

Payment to a foreign testing laboratory for automated type testing of circuit breakers was not fees for technical services under section 9(1)(vii) read with Explanation 2. Applying noscitur a sociis, the expression "technical services" was read with the associated human-element concepts of managerial and consultancy services, so mere use of sophisticated machines or a standard testing facility without meaningful human intervention did not qualify. On the facts, the laboratory performed destructive tests through automated equipment and issued reports and certificates, and the authorities did not show that the service depended on human technical skill. The remittance was therefore not chargeable under the provision, and no tax deduction at source was required.

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Issues: Whether the payment made to a foreign testing laboratory for type testing of circuit breakers, carried out through sophisticated machines without substantial human intervention, constituted fees for technical services under section 9(1)(vii) read with Explanation 2 of the Income-tax Act, 1961.

Analysis: The expression "fees for technical services" in Explanation 2 covers consideration for managerial, technical or consultancy services. Applying the rule of noscitur a sociis, the word "technical" takes colour from the associated words "managerial" and "consultancy", both of which ordinarily involve a human element. A service rendered merely by operating sophisticated machines or providing a standard facility, without meaningful human interface, does not by itself amount to technical services. On the facts, the testing laboratory conducted destructive type tests through automated equipment and issued reports and certificates, and the authorities did not establish that the service was provided by human technical skill rather than by machine-based standard testing.

Conclusion: The payment was not in the nature of fees for technical services and was not chargeable under section 9(1)(vii) read with Explanation 2. The assessee was not required to deduct tax at source on the remittance.

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