Technical supervision fees treated as management charges, falling outside the India-Sweden DTAA industrial profits exemption.

Technical supervision fees under a consultancy agreement were treated as consideration for management-related services rather than exempt industrial or commercial profits under Article III of the India-Sweden DTAA. Although Article III(1) exempts industrial or commercial profits of a foreign enterprise absent a permanent establishment, Article III(3) excludes management charges from that expression. Because the agreement required supervision of installation, testing, and commissioning in addition to consultancy, the consideration for those supervisory activities fell within the treaty exclusion. The fees were therefore outside the Article III exemption and taxable.

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Issues: Whether technical supervision charges received under the consultancy agreement were exempt as industrial or commercial profits under Article III of the India-Sweden DTAA, or whether they fell within the treaty exclusion for management charges.

Analysis: Article III(1) exempts industrial or commercial profits of a foreign enterprise in the absence of a permanent establishment, but Article III(3) expressly excludes management charges from that expression. The agreement required the assessee not only to render consultancy services but also to supervise installation, testing, and commissioning activities. On a plain reading of the treaty and the agreement, the consideration for those supervisory activities was in the nature of management charges, and therefore outside the scope of industrial or commercial profits under the DTAA.

Conclusion: The technical supervision fees were not exempt under Article III of the DTAA and were taxable.

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