Automated deal-matching receipts were not technical fees, no Indian permanent establishment existed, and a royalty plea was rejected.

An automated deal-matching platform was treated as a standard facility, not a customised technical service, because it involved no human intervention and did not make available technical knowledge, skill, experience or know-how; the receipts were therefore not fees for technical services under domestic law or the India-U.K. treaty. The article also notes that no permanent establishment existed in India because the relevant server and business operations were outside India, the Indian communication network was not at the enterprise's disposal, and no personnel rendered services in India. A belated attempt to characterise the receipts as royalty through additional grounds was rejected as a new factual case requiring further inquiry.

---

---

Issues: (i) whether receipts from Reuters Dealing 2000-2/2002 constituted fees for technical services under the Income-tax Act and the India-U.K. tax treaty; (ii) whether the assessee had a permanent establishment in India; (iii) whether the revenue could be permitted to raise additional grounds to characterise the receipts as royalty.

Issue (i): whether receipts from Reuters Dealing 2000-2/2002 constituted fees for technical services under the Income-tax Act and the India-U.K. tax treaty.

Analysis: The service was an electronic deal-matching platform enabling subscribers to transact through an automated system. It was a standard facility and not a customised technical service. The receipts did not arise from any human intervention, nor did the service make available technical knowledge, skill, experience, or know-how to the users. The treaty test was therefore not satisfied, and the domestic law characterisation as fees for technical services also failed on the facts found.

Conclusion: The receipts were not fees for technical services and were not taxable on that basis.

Issue (ii): whether the assessee had a permanent establishment in India.

Analysis: The relevant server and business operations were outside India. The communication network in India was not owned by the assessee and was not at its disposal. No personnel of the assessee rendered services in India. On these facts, neither a fixed place permanent establishment nor a service permanent establishment was established.

Conclusion: The assessee did not have a permanent establishment in India.

Issue (iii): whether the revenue could be permitted to raise additional grounds to characterise the receipts as royalty.

Analysis: The attempt to recharacterise the receipts as royalty through additional grounds was treated as an impermissible attempt to build a new case at the appellate stage. The proposed issue also required further factual investigation and could not be admitted in the appeal as framed.

Conclusion: The additional grounds were not admitted.

Final Conclusion: The orders of the first appellate authority were upheld, and the revenue's appeals failed because the receipts were neither fees for technical services nor taxable in the absence of a permanent establishment, while the belated royalty plea was rejected at the threshold.

Ratio Decidendi: A mere automated or standard service facility, without human intervention and without making available technical knowledge to the user, does not constitute fees for technical services; and, absent ownership or control over the place or network used in India, no permanent establishment is established.

---