Natural resource installation services excluded from fees for technical services under the India-Portugal DTAA.

Technical and engineering receipts for engineering packages, drawings, layouts, specifications, manuals, on-site supervision, and man-day charges were held to fall within the India-Portugal DTAA exclusions for services connected with installations or structures used in the exploration or exploitation of natural resources. The services were integrally linked to erection and installation of smelter plants and related facilities, rather than amounting to a standalone transfer of technology. For independent purchase orders, the materials merely enabled the recipients to study and comment on proposals and did not make technology available for independent use. The receipts were therefore not taxable as fees for technical services and the related additions were deleted.

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Issues: Whether the engineering package fee and on-site man-day charges received by the assessee were taxable as fees for technical services under the India-Portugal DTAA, and whether the receipts were excluded by the carve-outs for services rendered in connection with an installation or structure used for the exploration or exploitation of natural resources.

Analysis: The assessee invoked the most favoured nation clause in the India-France DTAA and relied on the narrower definition of fees for included services in the India-Portugal DTAA. The relevant treaty provisions excluded from FTS services rendered in connection with an installation or structure used for the exploration or exploitation of natural resources, and services connected with building site, structure, installation or assembly projects and supervisory activity. The disputed receipts consisted of engineering packages, drawings, layouts, specifications, manuals, on-site supervision, and man-day charges used for erection and installation of smelter plants and related facilities. The receipts were not treated as mere transfer of an intangible technology solution, but as services integrally connected with installation and erection of plant and machinery involved in the natural resource chain. For the balance amounts received under independent purchase orders, the materials supplied enabled the recipients to study and comment on proposals and did not establish that technology had been made available so as to permit independent application by the recipient. The on-site man-day charges also fell within the treaty exclusions.

Conclusion: The disputed receipts were not taxable as fees for technical services under the India-Portugal DTAA and the additions were liable to be deleted.

Ratio Decidendi: Where technical and engineering services are rendered in connection with installation or structure used for exploration or exploitation of natural resources, and the recipient is not enabled to independently apply the technology contained in the deliverables, the receipts fall within the treaty exclusion and are not taxable as fees for technical services.

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