Background screening service receipts are not royalty or technical fees where no know-how is made available under the treaty.

Receipts from background screening and investigation services were held not to be royalty because they did not involve use of, or right to use, copyright, database, equipment, or industrial, commercial or scientific information under Article 13 of the India-UK DTAA. They were also held not to be fees for technical services because the factual reports were for internal use only and did not make available technical knowledge, experience, skill, know-how or processes to the client. In the absence of a permanent establishment, the receipts were not chargeable in India on the basis contended by the Revenue.

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Issues: Whether receipts from background screening and investigation services were taxable in India as royalty or fees for technical services under Article 13 of the India-UK DTAA.

Analysis: The receipts were held to be consideration for background verification services and not for use of, or right to use, any copyright, database, equipment, or information concerning industrial, commercial or scientific experience. The reports were factual in nature, meant only for the client's internal use, and did not permit any commercial exploitation. The services also did not make available technical knowledge, experience, skill, know-how or processes to the clients, so the receipts could not be characterised as fees for technical services. In the absence of a permanent establishment, the income was not chargeable on the footing adopted by the Revenue.

Conclusion: The characterisation of the impugned receipts as royalty or fees for technical services was rejected, and the issue was decided in favour of the assessee.

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