Taxability of technical service receipts turned on where services were sourced and consumed, leading to remand for fresh fact-finding.

Taxability of fees for technical services paid to a UAE resident turned on whether the services were sourced and consumed outside India, because the assessee invoked the exception to the deeming rule for income accruing in India. The record was not conclusive on who contracted for and utilised the services, so the factual foundation for the exemption claim was found to need fresh examination. The matter was remanded for de novo reassessment after verification of the relevant evidence, and the alternative treaty contention was left open as academic at that stage.

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Issues: Whether the receipts characterized as fees for technical services were taxable in India in the hands of a UAE resident, and whether the matter required fresh examination on the factual question whether the source of income and utilization of services were outside India.

Analysis: The assessee claimed that the services were rendered in the UAE for a UAE project and that the Indian purchaser was only issuing purchase orders for administrative convenience, while the Revenue maintained that the source and utilization of the services were in India and that the receipts were taxable under the deeming provisions governing income accruing or arising in India. The Tribunal noted that taxability depended on a proper appreciation of the evidence as to who ically contracted for and consumed the services, and observed that the record did not contain conclusive material to determine that factual controversy. Since the assessee sought to rely on the exception in the deeming provision and had the primary burden to establish the factual foundation for that claim, the Tribunal held that the issue had not been examined in the correct perspective and needed fresh adjudication.

Conclusion: The matter was remanded to the Assessing Officer for de novo reassessment after verification of the relevant facts and evidence, and the assessee's alternative contention under the treaty was left open as academic at this stage.

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