Automated data processing receipts are not royalty or technical fees where no right to use technology or human intervention is shown.

Receipts from automated data processing services were held not to be royalty because the arrangement involved outsourced processing work through the provider's own computer systems and infrastructure, with no transfer of any right to use a process, equipment, technology, or know-how to the Indian payer. The receipts were also held not to be fees for technical services because the facility was a standard automated service, lacking constant human intervention and not amounting to specialised, exclusive, or customised technical service. The addition based on characterising the receipts as royalty or fees for technical services was not sustainable, and the assessee succeeded.

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Issues: (i) Whether the receipts from data processing services were taxable as royalty; (ii) whether the receipts were taxable as fees for technical services.

Issue (i): Whether the receipts from data processing services were taxable as royalty.

Analysis: The receipts arose from automated data processing services rendered through computer systems and infrastructure used by the assessee for its own operations. There was no transfer of any right to use a process, equipment, technology, know-how, or similar property to the Indian payer, and the arrangement remained an outsourcing of processing work rather than a grant of use of technology.

Conclusion: The receipts were not taxable as royalty and this issue was decided in favour of the assessee.

Issue (ii): Whether the receipts were taxable as fees for technical services.

Analysis: The service was found to be a standard, automated facility for data processing with no constant human endeavour or human intervention. The activity did not amount to specialised, exclusive, or customised technical service and was only a facility available through programmed systems.

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

Final Conclusion: The addition based on treating the receipts as royalty or fees for technical services could not be sustained, and the assessee succeeded in the appeal.

Ratio Decidendi: Automated data processing rendered through a standard facility, without transfer of a right to use technology or process and without material human intervention, does not constitute royalty or fees for technical services.

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