India and United Kingdom: treaty between India and United Kingdom – Indian decision on taxability of fees for technical services

December 12, 2013

The Indian Income Tax Appellate Tribunal (ITAT) issued its decision on 31 May 2013 in the case of Veeda Clinical Research Private Limited (ITA 1406/Ahd/2009) that the provision market awareness and development in-house training services to an Indian company is not regarded as making available of technical knowledge so as to fall within the term “fees for technical services” (FTS ) of the India–United Kingdom Income Tax Treaty (1993).


The taxpayer (i.e., Veeda Clinical Research Private Limited), an Indian company, had made certain payments to Veeda Clinical Research Limited, based in the UK, for providing in-house training to its information technology and medical staff.

The taxpayer did not withhold taxes on payment as it was of the view that, since the training services did not make available any technical knowledge, experience, skill, know-how or process, or consist of development and transfer of a technical plan, the payment would fall outside article 13 of the treaty.

However, the tax authorities contended otherwise and disallowed the payment of training fees.


The issue here is whether rendering of training services would be regarded as making available technical knowledge, experience, skill, etc., and therefore be subject to withholding tax as per the treaty?


The ITAT held that, although technical training can result in transfer of technology, the decisive factor is not training services per se , but whether the training services were of such a nature that they involved the transfer of technology.

It was further held that the onus of proving that there was transfer of technology involved lies with the tax authorities.

Since, in the present case, the training services were general in nature, with no contention from the tax authority that such training resulted in transfer of technology, the fees for training would not be regarded as making available technical knowledge, experience, skill, etc., and thus would fall outside article 13 of the treaty.

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