DTAA taxability of consultant payments turns on whether design review was advisory or a transfer of technical design.

Payment to a US consultant required factual verification to determine whether it constituted fees for included services or royalty under the India-US DTAA. The record suggested the consultant was engaged mainly to review the crane design and recommend improvements, but it was unclear whether those inputs were only advisory or amounted to development and transfer of a technical plan or design. Because the lower authorities had not examined that distinction clearly, the issue was not finally decided on merits and was remitted to the Assessing Officer for verification of the consultant's actual role and the applicability of Article 12.

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Issues: Whether the payment made to the US consultant was chargeable to tax in India as fees for included services or royalty under the India-US DTAA, and whether the matter required further factual verification as to whether the consultant merely reviewed the design or actually developed and transferred a technical plan or design.

Analysis: The service agreement and the material on record indicated that the consultant was engaged principally to review the crane design and to suggest improvements. The distinction between review and supervision on the one hand, and development or transfer of a technical design on the other, was central. The existing record did not clearly show whether the suggestions were only advisory, or whether they involved a major modification or implementation of design changes. The lower authorities had not examined this factual aspect with sufficient clarity.

Conclusion: The issue was not finally determined on merits. The matter was set aside to the Assessing Officer for verification of whether the consultant only made suggestions or actually implemented design changes so as to attract Article 12 of the India-US DTAA.

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