Liaison and procurement payments to a non-resident were not fees for technical services, so TDS under section 195 did not apply.

Payments to a non-resident for liaison, procurement of orders and incidental reimbursement were treated as commission-related outgoings, not fees for technical, managerial or consultancy services. Although the agreement and invoices used consulting-style descriptions, the actual work was limited to interfacing and order procurement, and the non-resident certified that no technical or managerial services were rendered. On those facts, the sums were not chargeable to tax in India in the absence of a permanent establishment or business connection, so tax deduction at source under section 195 did not arise. The demand under section 201 and interest under section 201(1A) were deleted.

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Issues: Whether payments made to a non-resident for liaison, procurement of orders and incidental services constituted fees for technical services liable to tax deduction at source under the Income-tax Act, 1961.

Analysis: The agreement and invoices described the services as consulting, project work procurement and similar tasks, but the actual material showed that the non-resident acted only as a liaison and procurement agent. The non-resident certified that it had not rendered technical or managerial services and had merely interfaced to obtain orders, while the assessee carried out the software services itself through its own network access. On these facts, the payments were held to be commission and reimbursement of incidental expenses for procuring orders, not consideration for managerial, technical or consultancy services within section 9(1)(vii) of the Income-tax Act, 1961. In the absence of technical services and with no permanent establishment or business connection in India, the amounts were not chargeable to tax in India and section 195 did not apply.

Conclusion: The payments were not fees for technical services and were not subject to deduction of tax at source under section 195; the demand raised under section 201 and interest under section 201(1A) were directed to be deleted.

Ratio Decidendi: A payment to a non-resident for liaison and procurement of orders, without rendering technical or managerial services, is not fees for technical services and therefore does not attract tax deduction at source under section 195.

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