Treaty protection for underwriting commission: receipts for GDR/FCCB issue were not fees for technical services under the India-UK DTAA.

Under the India-UK DTAA, underwriting commission and reimbursement of expenses received for GDR/FCCB issuance were not taxable in India as fees for technical services because the services were not made available to the Indian recipient. The tribunal applied section 90(2) of the Income-tax Act, 1961 and the treaty's more beneficial provisions, following the earlier Raymond Ltd. line of reasoning that such investment banking receipts fall outside the treaty definition of fees for technical services. The Revenue's challenge failed, and the addition was not sustained.

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Issues: Whether underwriting commission and reimbursement of expenses received by the assessee for issue of GDR/FCCB from an Indian company were taxable in India as fees for technical services under the India-UK DTAA.

Analysis: The assessee's receipts from investment banking transactions were examined in the light of the India-UK DTAA and the earlier tribunal decision in Raymond Ltd. The applicable treaty provisions were considered along with section 90(2) of the Income-tax Act, 1961, under which the assessee was entitled to rely on the more beneficial treaty provisions. It was found that the receipts did not constitute fees for technical services, as the services were not made available to the Indian companies. The earlier decision had also held that underwriting commission and allied receipts did not fall within the scope of fees for technical services and, therefore, no tax liability arose in India on that footing.

Conclusion: The receipts were not taxable in India as fees for technical services under the India-UK DTAA, and the Revenue's challenge failed.

Final Conclusion: The assessment addition on this count was sustained in favour of the assessee, and the Revenue's appeal was dismissed.

Ratio Decidendi: Under a tax treaty, receipts are not taxable as fees for technical services unless the treaty definition is satisfied and the relevant services are made available to the Indian recipient; where they are not, treaty protection prevails under section 90(2) of the Income-tax Act, 1961.

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