Fees for included services test fails where no technology or know-how is made available to the Indian recipient.

Passenger Services receipts generated through an assessee's software and data centre in the USA were not taxable in India as fees for technical services under section 9(1)(vii) or as fees for included services under Article 12 of the India-USA DTAA, because no technology, technical knowledge, skill, know-how or process was made available to the Indian recipient. The Article 12(4)(b) test requires the recipient to be enabled to apply the technology itself, and mere use of a technologically supported service is insufficient. On that basis, the treaty definition of fees for included services was not met and the addition was rightly deleted.

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Issues: Whether receipts from Passenger Services rendered from the assessee's data centre in the USA were taxable in India as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and as fees for included services under Article 12 of the India-USA DTAA.

Analysis: The services were rendered through the assessee's software and data centre in the USA, and no technology, technical knowledge, skill, know-how or process was made available to the Indian recipient. The test under Article 12(4)(b) required the recipient to be enabled to apply the technology, and the mere use of a technologically supported service did not satisfy that requirement. The receipts therefore did not fall within the treaty definition of fees for included services. Since the treaty provision was not attracted, the receipts could not be brought to tax on that basis, and the view taken by the appellate authority was supported by the cited judicial precedents.

Conclusion: The Passenger Services receipts were not taxable as fees for included services under Article 12 of the India-USA DTAA, and the addition was rightly deleted.

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