Make available test denied taxability of seismic data interpretation services, so no withholding obligation arose.

Remittance for 3D seismic data interpretation services was examined for withholding tax purposes under section 195 of the Income-tax Act. The service involved interpretation of data supplied by the assessee for exploration work, with deliverables in the form of reports and maps. On the facts, the provider did not transfer technical knowledge, skill or know-how so as to enable the assessee to perform the work independently in future, and the arrangement failed the make available test under the applicable treaty. Although the payment could arguably fall within fees for technical services under domestic law, the treaty position governed taxability. As the sum was not chargeable to tax in India, no withholding obligation arose and the assessee was not to be treated as in default.

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Issues: Whether the remittance made for 3D seismic data interpretation services was chargeable as fees for technical services so as to require deduction of tax at source under section 195 of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under sections 201(1) and 201(1A).

Analysis: The services consisted of interpretation of data supplied by the assessee for exploration work and the deliverables were reports, maps and related outputs. On the facts, the service provider did not transfer technical knowledge, skill or know-how to the assessee in a manner enabling it to perform such work independently in future. The arrangement therefore did not satisfy the make available test under the applicable treaty. Even if the payment could be viewed as technical services under section 9(1)(vii), the treaty position prevailed for determining taxability. As the amount was not chargeable to tax in India on the treaty test, no withholding obligation arose.

Conclusion: The remittance was not taxable as fees for technical services under the treaty and the assessee was not liable to be treated as an assessee in default; the addition was directed to be deleted.

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