Cross-border GDR issue services were not fees for technical services; no Indian tax deduction was required.

Payment to a UAE entity for acting as sole book-runner, global coordinator and lead manager for a GDR issue was treated as commercial services rendered wholly outside India. Because the services were neither rendered nor utilised in India and the recipient had no permanent establishment in India, the amount did not qualify as fees for technical services under section 9(1)(vii)(b) of the Income-tax Act, 1961. The treaty also did not tax the receipt in the absence of a relevant taxing article and any permanent establishment. The payment was therefore not taxable in India and no tax was deductible under section 195.

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Issues: Whether the payment made to the UAE entity for acting as sole book-runner, global coordinator and lead manager for the GDR issue was taxable in India as fees for technical services, and whether tax was deductible under section 195 of the Income-tax Act, 1961.

Analysis: The payment was found to relate to commercial services rendered wholly outside India in connection with the GDR issue. The services were neither rendered in India nor utilized in India, and the recipient had no permanent establishment in India. On these facts, the payment did not fall within the scope of fees for technical services under section 9(1)(vii)(b) of the Income-tax Act, 1961. The treaty provisions also did not bring the amount to tax in India in the absence of a taxing article for such services and in the absence of a permanent establishment.

Conclusion: The payment was not taxable in India and no tax was deductible under section 195; the assessee was entitled to succeed in its appeal under section 248.

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