Fabrication charges not treated as fees for technical services under the India-Singapore tax treaty

Fabrication charges received from an Indian associated enterprise were examined for taxability as fees for technical services under section 9(1)(vii) and Article 12 of the India-Singapore DTAA. The Tribunal followed its earlier decisions in the assessee's own case for prior years and held that the fabrication activity did not meet the treaty definition of fees for technical services or the Revenue's relied-upon tests. The assessment could not be sustained on that basis, and the addition treating the receipts as fees for technical services was deleted.

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Issues: Whether fabrication charges received by the assessee from its Indian associated enterprise were taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The fabrication activity was held to be a recurring issue already decided in the assessee's own case for earlier years. The Tribunal followed those earlier decisions and accepted that the receipts did not fall within the treaty definition of fees for technical services. It was found that the services did not satisfy the treaty tests relied on by the Revenue, and the assessment could not be sustained on that basis.

Conclusion: The addition made by treating the fabrication charges as fees for technical services was deleted and the assessee succeeded on this issue.

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