Professional services under India-USA DTAA excluded fees for included services, leaving the non-resident's income not taxable in India.

Software development and related technical services rendered by a non-resident individual were treated as professional services under Article 15 of the India-USA DTAA, because that provision was read broadly and not as confined to named professions. On that characterisation, Article 12(5)(e) excluded the consideration from fees for included services, so taxability under Article 12(4) failed. Article 15 taxation also did not apply because there was no fixed base in India and the stay condition was not met. The income was therefore not taxable in India, and the Revenue's appeal failed.

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Issues: Whether the services rendered by the non-resident individual to the Indian payer constituted professional services falling under Article 15 of the India-USA DTAA, with the result that taxability under Article 12(4) was excluded and the income was not chargeable to tax in India.

Analysis: The treaty protection under Section 90(2) of the Income-tax Act, 1961 applied, and the decisive question was the proper characterization of the services under the DTAA. The services were software development and related technical work performed by an individual, and the scope of professional services under Article 15 was treated as inclusive and not confined to the specifically named professions. Once the services were found to be professional services rendered by an individual, Article 12(5)(e) excluded them from the ambit of fees for included services. The conditions for taxation under Article 15 were also not satisfied, as there was no fixed base in India and the stay condition was not met. The make available argument under Article 12(4) was therefore rendered unnecessary.

Conclusion: The services were professional services under Article 15, taxability in India under Article 15 failed, and the consideration was not taxable under Article 12(4); the Revenue's appeal failed.

Ratio Decidendi: Where an individual renders professional services within the meaning of Article 15 of the applicable DTAA, Article 12(5)(e) excludes the consideration from fees for included services, and in the absence of the conditions for taxation under Article 15, the income is not taxable in the source State.

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