Architectural design receipts under the India-Singapore DTAA were not treated as technical fees or royalty.

Project-specific architectural design services rendered to Indian clients were held not to be fees for technical services under Article 12(4)(c) of the India-Singapore DTAA because the work did not transfer technical knowledge, know-how, or any reusable capability enabling the clients to apply the technology independently. The receipts were also held not to be royalty under Article 12(3) because the contracts covered development and transfer of designs for specific projects, not a bare right to use existing designs or copyright. On that reasoning, the design-service receipts were not taxable as FTS or royalty.

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Issues: (i) Whether receipts from architectural design services rendered to Indian clients were taxable as fees for technical services under Article 12(4)(c) of the India-Singapore DTAA. (ii) Whether the same receipts were taxable as royalty under Article 12(3) of the India-Singapore DTAA.

Issue (i): Whether receipts from architectural design services rendered to Indian clients were taxable as fees for technical services under Article 12(4)(c) of the India-Singapore DTAA.

Analysis: The services were project-specific architectural design services. On the material examined, the deliverables were confined to conceptualisation and design for particular projects, with no transfer of technical knowledge, skill, know-how, or process enabling the clients to independently apply the technology contained in the services. The agreements did not provide for capacity building or transfer of a reusable technical capability, and the clients had to engage local architects for execution. The exclusion in Article 12(4)(c) therefore applied because the services did not enable the recipient to apply the technology contained therein.

Conclusion: The receipts were not taxable as fees for technical services and the finding was in favour of the assessee.

Issue (ii): Whether the same receipts were taxable as royalty under Article 12(3) of the India-Singapore DTAA.

Analysis: The contracts showed that the assessee was engaged to develop architectural designs for specific projects and not to grant a bare right to use existing designs. The ownership clauses indicated that the designs were deliverables prepared for the client, while the assessee did not retain a commercial right enabling exploitation of pre-existing intellectual property by the client. A payment for creation and transfer of project-specific designs is different from consideration for use of, or right to use, an existing design or copyright.

Conclusion: The receipts did not constitute royalty and the finding was in favour of the assessee.

Final Conclusion: The revenue's challenge to the appellate relief failed, and the assessment of the design-service receipts as taxable FTS or royalty was not sustained.

Ratio Decidendi: Under the India-Singapore DTAA, project-specific architectural design services are not taxable as FTS unless the recipient is enabled to apply the technology contained in the service, and payments for development and transfer of such designs do not constitute royalty where there is no mere grant of a right to use an existing design.

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