Offshore sale receipts were held not taxable as fees for technical services absent evidence of any service element.

Receipts from offshore sale of equipment, consumables and spare parts were held not to be fees for technical services under section 9(1)(vii) and Article 12 of the India-Ireland DTAA because the invoices and purchase orders reflected sale transactions with quantity, price and buyer details, and did not show consideration for services. The revenue failed to produce clinching material linking the payments to technical assistance, support services or any other service element. On the material available, the receipts were characterised as offshore sale of goods, not service income, and were therefore not taxable as fees for technical services.

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Issues: Whether receipts from offshore sale of equipment, consumables and spare parts were taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Ireland Double Taxation Avoidance Agreement.

Analysis: The invoices and purchase orders showed sale of equipment with quantity, price and buyer details, and did not indicate any payment for rendering services. The revenue authorities did not bring on record clinching material to show that the consideration was linked to technical assistance, support services or any other service element. On the material before it, the receipts were from offshore sale of goods and not from services.

Conclusion: The issue is decided in favour of the assessee and against the Revenue; the receipts were not taxable as fees for technical services.

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