Treaty taxation of service receipts turns on Article 7 where no separate fee-for-technical-services clause exists.

Receipts from services rendered to Indian group companies were held not taxable under the residuary Article 22(3) of the India-Thailand DTAA because the treaty contained no separate fee for technical services clause. Where the services formed part of the enterprise's regular business activities, Article 7 applied instead, and Indian taxability depended on the existence of a permanent establishment and attribution of profits to it. On the facts, the assessee had no permanent establishment in India and the Revenue did not rebut the evidence that the services were rendered in the normal course of business, so the addition was deleted.

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Issues: Whether receipts for services rendered to Indian group companies, treated as fee for technical services, were taxable under the residuary Article 22(3) of the India-Thailand DTAA or fell to be assessed as business income under Article 7.

Analysis: The assessee established that the services were rendered as part of its regular business operations and that it had no permanent establishment in India. The Tribunal noted that where a treaty does not contain a separate clause for fee for technical services, such receipts cannot be straightaway brought to tax under the residuary article merely because they are not covered elsewhere. If the receipts are attributable to the enterprise's business activities, Article 7 applies, and taxability in India depends on the existence of a permanent establishment and attribution of profits thereto. The revenue did not dislodge the factual material showing that the services were rendered in the normal course of business.

Conclusion: The receipts could not be taxed under Article 22(3) and were to be considered under Article 7 as business income; the addition was deleted, in favour of the assessee.

Ratio Decidendi: In the absence of a specific treaty article for fee for technical services, such receipts cannot be taxed under the residuary article if they are shown to arise from the enterprise's business activities; Article 7 governs, and taxability in India requires a permanent establishment.

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