Treaty classification of technical service receipts depends on Article 7 business profits, not the residuary article, absent a permanent establishment.

Where the India-Thailand DTAA contains no separate article for fees for technical services, such receipts are not moved to the residuary article if they arise in the ordinary course of the enterprise's business. The proper treaty character is business profits under Article 7, and Indian taxation then depends on the existence of a permanent establishment in India. On the stated facts, the services were shown to be part of the taxpayer's business and no permanent establishment was established, so the receipts were not taxable in India under the residuary article and the addition was set aside.

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Issues: Whether receipts from technical services rendered to Indian group companies were taxable under the residuary article of the India-Thailand DTAA or constituted business profits covered by Article 7, so as to be taxable in India only if attributable to a permanent establishment.

Analysis: The receipts were accepted to be fees for technical services, but the treaty contained no separate article dealing with such income. The residuary article applies only to income not otherwise dealt with in the DTAA, whereas business profits are governed by Article 7. The assessee produced material showing that the services were rendered in the normal course of its business and the revenue did not establish that the services were outside that business activity. The assessment proceeded on the basis of web portal material rather than the business constitution and documentary evidence, and the assessee had no permanent establishment in India. In these circumstances, the receipts could not be brought to tax by invoking the residuary article.

Conclusion: The receipts were to be assessed, if at all, as business profits under Article 7 and not under the residuary article; in the absence of a permanent establishment in India, they were not taxable in India. The addition was therefore set aside in favour of the assessee.

Ratio Decidendi: Where a treaty does not separately deal with fees for technical services, such receipts cannot be shifted to the residuary article if they arise in the ordinary course of the enterprise's business and are properly referable to business profits; taxation in India then depends on the existence of a permanent establishment.

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