Where the DTAA does not have a specific FTS/ FIS clause and also does not include the same within the definition of “royalty”.
In some DTAAs (such as those with Bangladesh, Brazil, Greece, Indonesia, Mauritius, Myanmar, Nepal, Philippines, Namibia, Saudi Arabia, Sri Lanka, Syria, Tajikistan, UAE, UAR Egypt and Zambia, etc.) there is no specific clause relating to FTS / FIS. The absence of the provision in the DTAA is not an omission but is a deliberate mutual agreement between the Contracting States not to recognize/classify any income as Fees for Technical Services for taxation. Once the income chargeable to tax as per the DTAA are categorized by excluding the FTS then the scope of taxing the said income as FTS cannot be expended by importing the said provision from the Income-tax Act when it is excluded under the DTAA. This is the end of the road for taxability in the source state.
Where DTAAs restrict the scope of “FTS”/“FIS” based on the “make available” criteria.
Some of the DTAAs which India has entered into (US, UK, Canada, Australia, Finland, Singapore, etc.) provide for a restrictive definition (i.e., “make available” criteria)of the term “FTS”/“FIS”. Here, the term ‘make available’ means that the person acquiring the technical service is enabled to independently apply the technology. Thus, where the recipient of technical services does not get equipped with the knowledge or expertise and the recipient would not be able to apply it in future independently without support from the service provider, it will not be a case of technical service having been ‘made available’.
Business Income / Other Income.
The AAR in case of Lanka Hydraulic Institute Limited  (AAR) (unreported) has taken a contrary view and held that if such income does not cover under FTS/FIS, it would be covered within the ambit of the Article dealing with “Other Income” as opposed to the Article dealing with “Business Profits”. But Hon’ble SC in case of Ishikawajima- Harima Heavy Industries Ltd v DIT (288 ITR 408)(SC) has cleared that in situations where a specific tax treatment is provided for “royalties” and “FTS” (in terms of a separate Article in the DTAA), other generic Articles (like the Article dealing with “Business Profits”) should not as such apply to the income dealt with by the specific Article.