Background screening receipts under the India-UK DTAA were not royalty or fees for technical services, lacking make-available elements.

Background screening and investigation receipts under the India-UK DTAA were treated as neither royalty nor fees for technical services because the activity was limited to collecting and validating factual information and issuing screening reports for internal client use. The reports did not involve use of copyright, access to a database, or imparting technical knowledge, experience, skill, know-how or processes, and therefore did not satisfy the make-available requirement. The assessment addition based on that characterisation was unsustainable, and the receipts were held not taxable on that basis.

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Issues: Whether receipts from background screening and investigation services were taxable as royalty or fees for technical services under the India-UK DTAA.

Analysis: The issue was treated as covered by earlier decisions on the same activity and the jurisdictional High Court had already held that background checks and verification of testimonials do not amount to use of technical knowledge, experience or skill. The services consisted of collection and validation of factual information and delivery of screening reports for internal use by clients. Such reports did not amount to use of copyright, access to a database, or imparting of commercial experience, and the services did not make available technical knowledge, experience, skill, know-how or processes to the client.

Conclusion: The receipts were not taxable as royalty or fees for technical services, and the issue was decided in favour of the assessee.

Final Conclusion: The assessment addition based on characterization of the screening receipts as royalty or fees for technical services could not be sustained.

Ratio Decidendi: Background verification and screening services that only generate factual reports for client use do not constitute royalty or fees for technical services unless they involve use of copyright, access to a database, or make available technical knowledge, experience, skill, know-how or processes.

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