Procurement services are not fees for technical services unless technical know-how is made available for future independent use.

Payment to a non-resident procurement agent for arranging merchandise for duty-free shops was analysed as a commercial sourcing arrangement, not fees for technical services under section 9(1)(vii) or Article 13 of the India-UK DTAA. No clause transferred technical knowledge, skill, know-how, or technical design, and the non-resident did not make any such input available for the assessee's independent future use. The make available condition was therefore not satisfied, and the payment was not chargeable to tax in India as fees for technical services.

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Issues: Whether the payment made to the non-resident procurement agent for arranging merchandise for duty-free shops was taxable in India as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 13 of the India-United Kingdom DTAA, and whether the services satisfied the make available condition.

Analysis: The agreement was examined as a procurement arrangement for sourcing merchandise abroad, and no clause was found for transfer of technical knowledge, skill, know-how, or technical design. The services were held to be commercial procurement services, not technical services, because the non-resident did not impart technical knowledge that the assessee could independently use in later transactions. The arrangement also did not show that the assessee engaged the non-resident for technical assistance; rather, it was for purchasing merchandise for the duty-free shop. On these facts, the make available requirement under the treaty was not satisfied.

Conclusion: The payment was not chargeable to tax in India as fees for technical services, and the addition sustained by the appellate authority was set aside.

Ratio Decidendi: Procurement services do not constitute fees for technical services unless they involve transfer of technical knowledge, skill, know-how, or a similar technical input that is made available to the recipient for independent future use.

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