Making available technical designs and project assistance triggers fees for included services taxability under the India-USA DTAA.

Payments to a non-resident for schematic design, design development, engineering documentation, construction support and field commissioning of water features were treated as fees for included services because the contract, read as a whole, made available technical designs, drawings, specifications and project assistance for use in India. Article 12(4)(b) of the India-USA DTAA applies where technical knowledge, skill, know-how or a technical plan or design is transferred or made available to the recipient, and ownership of the underlying intellectual property is not required. The payment was therefore taxable under the treaty, and deduction of tax at source under section 195 was correctly directed.

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Issues: Whether the payments made to the non-resident American company for preparing designs, drawings, technical specifications, and commissioning assistance for water features were taxable as fees for included services under Article 12(4)(b) of the DTAA between India and the USA, so as to require deduction of tax at source under section 195 of the Income-tax Act, 1961.

Analysis: The agreement was composite and cumulative, covering schematic design, design development, engineering and construction documentation, construction and installation support, and field commissioning. On a reading of the contract as a whole, the foreign company was not merely rendering advice; it was supplying technical designs, drawings, specifications, and project assistance for use in India. The decisive factor was that Article 12(4)(b) is attracted when technical knowledge, experience, skill, know-how, or a technical plan or design is made available or transferred for use by the recipient, and ownership of the underlying intellectual property is not required. The services were integrally connected with the execution and commissioning of the project in India, and the payment therefore fell within the treaty definition of fees for included services. The precedents relied upon by the assessee were distinguished on facts and treaty language.

Conclusion: The payment was taxable as fees for included services under Article 12(4)(b) of the DTAA, and deduction of tax at source under section 195 was correctly directed. The issue is decided against the assessee.

Ratio Decidendi: Transfer or making available of technical designs, drawings, or technical plans for use by the recipient in India constitutes fees for included services under Article 12(4)(b), even without transfer of ownership in the intellectual property.

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