Fees for technical services test: group support services were held not taxable absent proof of managerial, technical or consultancy character.

Receipts from group support services were not taxable as fees for technical services because the services, assessed from the functional agreement and actual activities, were found to be standardised support functions rather than predominantly managerial, technical or consultancy services. The expressions "managerial", "technical" and "consultancy" were read in their ordinary commercial sense, requiring control or administration, special technical skill, or advisory expertise with human interface. On the material available, the services and access to centralised systems did not show that the Indian entities were managed or that the receipts wholly fell within Article 12(3)(b) of the India-Belgium DTAA or section 9(1)(vii).

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Issues: Whether the receipts from provision of group support services to Indian entities were chargeable as fees for technical services under Article 12(3)(b) of the India-Belgium DTAA and section 9(1)(vii) of the Income-tax Act, 1961.

Analysis: The services were examined on the basis of the functional services agreement and the actual nature of the activities rendered, including information technology, procurement, shared business services, human resources, communication, finance, facility, legal and compliance, and related group functions. The expressions "managerial", "technical" and "consultancy" were construed in their ordinary commercial sense because they are not defined in the Act. Managerial services were treated as services involving control or administration of business, technical services as services requiring special skill or knowledge in a technical field, and consultancy services as advisory services requiring professional expertise and human interface. Applying these tests, the receipt of standardized support services and access to centralized systems did not, on the material placed, establish that the assessee managed the affairs of the Indian entities or rendered predominantly technical or consultancy services. The Department also did not discharge the burden of showing that the entirety of the receipts answered the treaty or statutory definition of FTS.

Conclusion: The receipts were not taxable as fees for technical services under Article 12(3)(b) of the India-Belgium DTAA or section 9(1)(vii) of the Income-tax Act, 1961.

Ratio Decidendi: Support services to group entities will not constitute fees for technical services unless the revenue establishes, on cogent material, that the services are predominantly managerial, technical or consultancy in nature as understood in common commercial parlance.

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