Treaty taxability of technical service receipts turned on prior-year consistency and remand for fresh factual examination.

Receipts characterised as fees for technical services under section 9(1)(vii) still required treaty-level examination under Article 12 of the applicable DTAA. For Sandvik Asia Private Limited, the services and factual matrix were unchanged from earlier years, and the treaty position had already been accepted in the assessee's favour; the receipts were therefore not taxable in India under Article 12. For Walter Tools India Private Limited, Seco Tools India Private Limited and Dormer Tools India Private Limited, the record was insufficient to establish the true nature of the services, so the matter was restored for fresh factual determination.

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Issues: (i) Whether the receipts from Sandvik Asia Private Limited were taxable in India as fees for technical services under Article 12 of the India-Sweden Double Taxation Avoidance Agreement read with the India-Portugal Double Taxation Avoidance Agreement via Protocol, notwithstanding their treatment as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961; (ii) Whether the receipts from Walter Tools India Private Limited, Seco Tools India Private Limited and Dormer Tools India Private Limited required fresh determination of their true nature of services.

Issue (i): Whether the receipts from Sandvik Asia Private Limited were taxable in India as fees for technical services under Article 12 of the India-Sweden Double Taxation Avoidance Agreement read with the India-Portugal Double Taxation Avoidance Agreement via Protocol, notwithstanding their treatment as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961.

Analysis: The receipt was accepted to be in the nature of fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961. The decisive question was treaty taxability under Article 12. The services rendered to Sandvik Asia Private Limited remained the same as in earlier years, and the Tribunal noted that in preceding assessment years, the same receipts had either been held not taxable under Article 12 or accepted as not taxable by the Revenue. On the admitted and unchanged facts, the treaty position had already been settled in the assessee's favour in earlier years.

Conclusion: The receipts from Sandvik Asia Private Limited were not taxable in India under Article 12 and the issue was decided in favour of the assessee.

Issue (ii): Whether the receipts from Walter Tools India Private Limited, Seco Tools India Private Limited and Dormer Tools India Private Limited required fresh determination of their true nature of services.

Analysis: For these entities, the assessee had not furnished a sufficient agreement or comparable evidence to establish the correct nature of the services, and only invoices were produced. Earlier orders had remitted similar matters to the Assessing Officer for fresh adjudication, and the facts for the year under consideration were materially similar. Following the earlier precedent, the existing finding was set aside and the matter was restored for fresh examination of the nature of the receipts.

Conclusion: The issue was remitted to the Assessing Officer for fresh determination.

Final Conclusion: The assessee succeeded on the taxability of the receipts from Sandvik Asia Private Limited, while the taxability of the receipts from the other three entities was reopened for reconsideration by the Assessing Officer.

Ratio Decidendi: Where the nature of services and the treaty position remain unchanged across assessment years, consistency with earlier binding or accepted findings can justify holding the receipts not taxable under the applicable treaty; where the nature of services is not properly established on record, the matter may be remitted for fresh factual determination.

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