Fees for technical services test failed on group support payments; no withholding tax disallowance was justified.

Payments for administration and business support services to an Australian group entity were not fees for technical services under the India-Australia DTAA because the arrangement covered standard group support functions and did not make available technical knowledge, skill, know-how or processes. Nil withholding certificates previously issued under section 195(2) for similar payments on the same contractual arrangement remained unaltered, and no material showed any change in facts. On that basis, no tax was deductible at source under section 195, so disallowance under section 40(a)(i) was not warranted and the addition was deleted.

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Issues: Whether the payment made to the Australian group entity for administration and business support services was liable for disallowance under section 40(a)(i) for failure to deduct tax at source under section 195, and whether the services fell within fees for technical services under the India-Australia DTAA.

Analysis: The agreement showed that the foreign entity provided administration and business support services, including finance, human resources, infrastructure, marketing and similar support, and that these services were intended to follow standard group procedures rather than transfer technical knowledge, experience, skill, know-how, or processes to the assessee. The record also showed that the competent tax authority had already issued nil withholding certificates under section 195(2) for similar payments on the same contractual arrangement and no material was brought to show that those certificates had been modified, cancelled, or rendered inapplicable because of any change in facts. In those circumstances, the earlier departmental determination on the same set of services and the absence of any making available of technical knowledge supported the assessee's stand that no tax was deductible at source.

Conclusion: The payment did not constitute fees for technical services and no disallowance under section 40(a)(i) was warranted; the deletion of the addition was upheld.

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