Sales commission to non-resident not taxable as fee for included services without "made available" technical knowledge.

Sales commission paid to a non-resident was examined under the India-US DTAA and the Income-tax Act to determine whether it constituted fee for included services. The Court applied the "made available" requirement, under which technical knowledge, experience, skill, know-how or processes must be transferred before a payment can fall within that category. It also applied the principle that, where no operations are carried out in India, income cannot be deemed to accrue or arise in India beyond the part attributable to Indian operations. On that basis, the commission was not treated as fee for included services and was not taxable on the Revenue's footing.

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Issues: Whether sales commission paid to a non-resident was taxable in India as fee for included services under the India-US DTAA and the Income-tax Act, 1961.

Analysis: The appeal turned on a settled question. The amount paid as sales commission was examined in the light of the requirement that technical knowledge, experience, skill, know-how or processes must be made available before the payment can qualify as fee for included services. The Court also applied the principle that where no operations are carried out in India, income arising abroad from the business connection cannot be deemed to accrue or arise in India beyond the part attributable to operations carried out in India. On that basis, the issue was treated as covered by binding precedent.

Conclusion: The question was answered in favour of the assessee and against the Revenue. Sales commission was not held to be fee for included services, and it was not taxable on the footing urged by the Revenue.

Final Conclusion: The appeal failed on the substantive tax issue and stood dismissed.

Ratio Decidendi: Sales commission paid to a non-resident is not taxable as fee for included services unless the relevant technical knowledge or services are made available, and income cannot be deemed to accrue in India where the operations giving rise to it are not carried out in India.

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