Commission for sales support not fees for technical services where no make available test is satisfied

Commission earned for procuring sales orders and providing marketing support to a foreign principal was held not to fall within fees for technical services under section 9(1)(vii) or the India-USA DTAA, because the services were sales promotion and business support rather than managerial, technical, or consultancy services. No technical knowledge, skill, know-how, or process was made available to the Indian recipient, so the make available requirement was not satisfied. The receipt was therefore not taxable as fees for technical services, and the substantive issue was decided in favour of the assessee; interest charges followed consequentially.

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Issues: Whether commission received for sales and marketing services rendered outside India was taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and the India-USA DTAA.

Analysis: The commission was earned for procuring sales orders and facilitating marketing support for the foreign principal. The services were found to be in the nature of sales promotion and business support, and not managerial, technical, or consultancy services. The record did not show that any technical knowledge, experience, skill, know-how, or process was made available to the Indian entity. The Tribunal followed the settled principle that commission paid for securing export or sales orders, without satisfying the make available requirement, does not constitute fees for technical services.

Conclusion: The receipt was not taxable as fees for technical services, and the assessee succeeded on the substantive issue. The interest charges were consequential.

Ratio Decidendi: Commission earned for procuring sales orders and rendering marketing support outside India is not fees for technical services where no technical knowledge, skill, know-how, or process is made available to the recipient.

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