Optional technical assistance linked to intellectual property licensing was not taxable as consulting engineer service.

An agreement providing an optional technical assistance facility was held to fall outside consulting engineer service where the assistance was not requested, received, or separately paid for. The consideration was treated as a licence fee for transfer of intellectual property rights, and the Board circular was relied on to distinguish such transfer from taxable service. The Tribunal decision noted that tax could arise only on actual technical assistance if separately rendered. On that basis, the amount was not taxable as consulting engineer service and the Revenue's appeal failed.

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Issues: Whether the amount paid under the agreement was liable to service tax as consulting engineer service, or whether it was only consideration for transfer of intellectual property rights with any technical assistance being optional and not separately chargeable.

Analysis: The agreement showed that technical assistance was only an optional facility to be provided on request. There was no evidence that the assessee had requested or received such assistance or made any separate payment for it. The consideration was for the licence fee relating to transfer of intellectual property. The Board circular also treated transfer of intellectual property rights as not amounting to rendition of taxable service. The Tribunal decision relied on by the Revenue distinguished between licence fee for know-how and actual technical assistance, and held that tax could arise only on the latter if separately rendered.

Conclusion: The amount in question was not taxable as consulting engineer service, and the Revenue's appeal failed.

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