Treaty characterisation of technical fees as business profits barred Indian tax absent a permanent establishment.

Fees for technical services received by a UAE resident were treated as business profits under the Indo-UAE treaty because the agreement did not contain a separate charging article for such income. The domestic-law definition could not be imported to tax the receipt where the treaty's distributive rules otherwise allocated taxing rights. As the services were rendered in the course of the assessee's regular business and no permanent establishment existed in India, Article 7 barred Indian taxation. The residuary and double-taxation elimination provisions could not be used to restore domestic charging provisions. The addition was therefore unsustainable.

---

---

Issues: Whether fees for technical services received by a UAE resident were chargeable to tax in India when the Indo-UAE Double Taxation Avoidance Agreement contained no specific article for fees for technical services and the assessee had no permanent establishment in India.

Analysis: The receipt was accepted as fees for technical services in substance, but the treaty did not contain any separate charging article for such income. The Court held that where a treaty deliberately omits a specific category of income, the income cannot be taxed by importing the domestic-law definition when the treaty otherwise allocates the taxing right through its distributive rules. Since the services were rendered in the course of the assessee's regular business, the receipt was to be characterised under the treaty as business profits. In the absence of a permanent establishment in India, Article 7 barred taxation in India. The residuary or elimination-of-double-taxation provisions could not be used to bring the income back within domestic charging provisions.

Conclusion: The fees for technical services were not chargeable to tax in India under the Indo-UAE treaty and the addition was unsustainable.

---