Technical services payment, not royalty, where a one-off engineering study gave no continuing right to use know-how.

A one-time payment for a calculation report and related technical assistance for a specific engine application was treated as fees for technical services, not royalty, under the India-France DTAA. The Tribunal held that royalty requires consideration for use of, or the right to use, intellectual property or similar rights conferring continuing or enduring advantage, whereas a discrete technical study performed for a single business problem does not amount to such exploitation of know-how. Because the report had no independent or continuing use beyond the project, the payer was not required to deduct tax at source.

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Issues: Whether payments made to a non-resident for a calculation report and related technical assistance in connection with a specific engine application were royalties or fees for technical services, and whether tax was required to be deducted at source under section 195(2).

Analysis: The payment was made for a specific, one-time technical study undertaken entirely in France to solve a particular engineering problem. The Tribunal applied the DTAA between India and France and held that royalties contemplate consideration for use of, or the right to use, intellectual property, designs, plans, or information conferring an enduring or extended advantage. By contrast, fees for technical services cover services rendered for a specific task and do not amount to exploitation of know-how on a recurring basis. The calculation report had no independent or continuing use for the assessee beyond the particular project, and the case was closer to technical service fees than to royalty.

Conclusion: The payment was held to be fees for technical services and not royalty. The assessee was not liable to deduct tax under section 195(2).

Ratio Decidendi: A payment for a specific technical study or calculation undertaken to solve a discrete business problem, without conferring a right to use know-how or other intellectual property for continuing exploitation, is fees for technical services and not royalty.

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