Underwriting commission for ADR/GDR services not taxable where no technical knowledge was made available to the recipient.

Underwriting commission paid to a non-resident for ADR/GDR-related services was not fees for technical services because the arrangement only involved assuming liability for any unsubscribed portion and did not impart technical knowledge, skill, know-how or a process to the Indian recipient. The treaty "make available" test was not satisfied, as the services merely enabled the transaction without transferring any enduring technical capability. The payment therefore fell outside section 9(1)(vii), and the more beneficial India-UK DTAA position under section 90(2) also supported non-taxability.

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Issues: Whether underwriting fees received by a non-resident for ADR/GDR related services were taxable in India as fees for technical services or fees for included services under the Income-tax Act and the India-UK DTAA.

Analysis: The underwriting commission was paid for assuming liability to subscribe to any unsubscribed portion of the issue and did not involve imparting technical knowledge, experience, skill, know-how, or process to the Indian client. Applying the treaty provisions, the decisive test was whether the services made available such technical knowledge or skill to the recipient. The services rendered only enabled the Indian companies to obtain the benefit of the transaction, without transferring any enduring technical capability to them. On that basis, the payment could not be brought within the scope of fees for technical services under section 9(1)(vii), and the more beneficial treaty position under section 90(2) also supported non-taxability.

Conclusion: The underwriting fees were not taxable as fees for technical services or fees for included services, and the revenue's challenge failed.

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