Make available test defeats fees for included services where foreign research organisations only deliver study results.

Payments to foreign contract research organisations for bio-equivalence and clinical studies were held not to constitute fees for included services because the service providers did not make available technical knowledge, experience, skill, know-how or processes, nor transfer any technical plan or design. The receipts were treated as business income under Article 7, and since the foreign recipients had no permanent establishment in India, the amounts were not taxable in India. On that basis, no tax was required to be withheld on the remittances, and the Revenue's appeals failed.

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Issues: Whether payments made to foreign contract research organisations for bio-equivalence studies were fees for included services taxable in India, or business profits not chargeable in the absence of a permanent establishment, and whether tax was deductible at source on such remittances.

Analysis: The payments were made for clinical and bio-equivalence studies and for final reports submitted after the studies were completed. The services rendered did not transfer technical knowledge, experience, skill, know-how, or processes to the Indian payer, nor did they involve development and transfer of a technical plan or technical design. The foreign organisations merely used their own expertise to conduct the studies and supplied only the results. On that basis, the receipts did not fall within Article 12 as fees for included services, but were business receipts under Article 7. As the foreign recipients had no permanent establishment in India, the amounts were not taxable in India and no withholding obligation arose.

Conclusion: The payments were not taxable as fees for included services, no tax was deductible at source, and the Revenue's appeals failed.

Final Conclusion: The Tribunal upheld the view that mere rendering of sophisticated research services without making available the underlying technical know-how does not attract fee-for-services taxation under the treaty.

Ratio Decidendi: Under the relevant treaty, technical services are taxable only if the service provider also makes available technical knowledge, experience, skill, know-how, or processes, or transfers a technical plan or design; absent that and absent a permanent establishment, the consideration is business income not chargeable in India.

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