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Issues: Whether the design review and quality control services rendered by the Finnish non-resident made available technical knowledge, experience, skill, know-how or processes, or involved development and transfer of a technical plan or technical design, so as to constitute fees for technical services under the India-Finland DTAA, and consequently whether the payments were chargeable to tax in India so as to require deduction of tax at source under section 195.
Analysis: The services consisted only of review of designs, drawings, estimates, layouts and related quality control work. The relevant treaty provision taxed consultancy or technical services only if they either made available technical knowledge, experience, skill, know-how or processes to the recipient, or consisted of development and transfer of a technical plan or design. The recipient of the services was not shown to have acquired any technical knowledge or skill for independent future use without recourse to the service provider. The services were also not shown to involve transfer of any technical plan or design developed by the non-resident. In the absence of a permanent establishment in India, the receipts were not taxable as business profits either. Since section 195 applies only to sums chargeable under the Act, no obligation to deduct tax arose.
Conclusion: The payments were not fees for technical services or taxable business income in India, and no tax was deductible at source; the assessee succeeded.
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