Advisory review services do not amount to fees for technical services unless they make available technical know-how to the recipient.

Advisory assistance and review services for hotel design and construction were examined under the Indo-US DTAA "fees for included services" test and the domestic concept of fees for technical services. The services were found to be limited to review of design documents, comparison with standards, and suggestions for improvement, without any transfer of technical know-how, technical plan, or design, and without enabling the recipient to use the skill independently after the engagement ended. On that basis, the payment was treated as outside both the treaty and domestic tax classifications, and the related withholding and demand consequences did not survive.

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Issues: Whether the advisory assistance and review services rendered for hotel design and construction were taxable as fees for included services under the Indo-US DTAA and as fees for technical services under the Income-tax Act, and whether the consequential withholding and demand provisions were attracted.

Analysis: The payment was examined in the light of the treaty definition of fees for included services, which requires either services ancillary and subsidiary to a royalty payment or services that make available technical knowledge, experience, skill, know-how, processes, or a technical plan or design. The services found on facts were advisory in nature, involving review of design documents, comparison with standards, and suggestions for improvement, without transfer of technical know-how or any technical plan or design to the recipient. The reasoning further applied the settled principle that the recipient must be enabled to use the technology or skill independently after the service ends. On that basis, the payment was held not to fall within the treaty expression or the domestic law concept of fees for technical services, and the withholding and consequential demand provisions did not survive.

Conclusion: The payment was not taxable as fees for included services or fees for technical services, and the associated withholding demand could not be sustained.

Ratio Decidendi: Advisory or review services do not constitute fees for included services unless they make available technical knowledge, experience, skill, know-how, processes, or a technical plan or design to the recipient.

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