Technical know-how fees and deputed engineers: taxability in India turned on whether the personnel remained the assessee's employees.

The taxability of technical know-how fees received for deputed engineers depended on the true character of the design and construction supervision arrangement, especially whether the personnel remained the assessee's employees or became employees of the Indian company. The Tribunal noted that the governing principles on accrual, deemed accrual, and business connection could not be applied correctly without resolving that factual question, because services rendered in India and technical information furnished from outside India may have different tax consequences. The matter was therefore sent back for fresh examination of the employment status and related facts before a decision on Indian taxability.

---

---

Issues: Whether the technical know-how fees received by the assessee in respect of deputed engineers were taxable in India, and whether the matter required fresh examination on the question whether the personnel remained employees of the assessee or became employees of the Indian company.

Analysis: The dispute turned on the true character of the arrangement under the design and construction supervision agreement. The earlier view had proceeded on the footing that the deputed engineers remained the assessee's personnel and that the services were rendered in India, while the assessee relied on the principle that technical information furnished from outside India does not, by itself, create taxable accrual in India. The Tribunal noted that the decisive factual question was whether the deputed technicians continued to be employees of the assessee or had been independently employed by the Indian company, because that fact could materially affect the application of the governing principles on accrual, deemed accrual, and business connection.

Conclusion: The taxability of the amount was not finally determined and the matter was sent back for fresh decision after determining the true employment status and related facts.

---