Fees received by Canadian company for providing technical drawings and reports would qualify as Fees for Included Services under India-Canada tax treaty

Delhi High Court (the High Court) in case of DIT Vs. SNC Lavalin International Inc [2011] 332 ITR 314 (Del) held that fees received by the taxpayer for providing technical drawings and reports in relation to infrastructure projects would qualify as Fees for Included Services under India-Canada tax treaty (tax treaty). Accordingly, tax was to be deducted at 15 percent on payments made to the taxpayer.  Further, the High Court observed that the term transfer as used in Article 12(4) of the tax treaty does not refer to absolute transfer of ownership; but refers to transfer of technical drawings or designs for the use or the benefit of other party

Facts of the case

• The taxpayer, a tax resident of Canada, was engaged in providing consultancy services for infrastructure projects. Taxpayer entered into contract with National Highway Authority of India (NHAI) for providing technical drawings and reports.
• The scope of the service included investigation of the availability and viability of various modern technologies to ensure the most economical cost estimate, preparation of the detailed project report covering the entire design for rehabilitation and strengthening of existing carriage ways and study of environmental resettlement under the guidelines of the Government of India.

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