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"(1) Whether the amount of contribution received/receivable to recover part of the cost of the technical assistance provided by the applicant under the provisions of its aid programme to the companies assisted by it in India is income of the applicant under the provisions of the Income-tax Act and chargeable to tax ?
(2) Whether the amount of contribution received/receivable to recover part of the cost of the technical assistance provided by the applicant under the provisions of its aid programme to the companies assisted by it in India is fees for technical services as defined in Explanation 2 to Clause (vii) of Sub-section (1) of Section 9 of the Income-tax Act or in article 13 para. 4 of the Avoidance of Double Taxation Agreement with India and the U. K. (3) Even if the amount of contribution referred to in question No. 2 be assumed to be in the nature of technical fees, will such fee be chargeable to tax in India keeping the memorandum of articles of association of the applicant in view ?"
(i) Assistance that is offered free of charge does not elicit the level of commitment required from companies to ensure the success of the project;
(ii) It was considered that companies were benefited financially from the assistance provided and it was, therefore, reasonable to expect some financial input from them ;
(iii) The rupee contribution may be added to the overall budget so that the scope of the programme could be extended and more companies could be assisted.

10. It has been necessary to set out in detail the nature of the arrangements between DECTA and the Indian companies which have been entered into as part and parcel of a development programme which has the blessings of the Governments of the United Kingdom and India. In substance, it is the ODA of the Government of U. K. that makes available to the Government of India a huge sum which is utilised by DECTA for providing necessary assistance to the Indian companies. The Indian companies have the benefit of these services and in lieu thereof they make a contribution which can perhaps be described as a "token contribution" towards the cost of the various projects. The problem that faces DECTA in this situation is whether the contribution made by the Indian companies under the above arrangement is liable to tax in India. The applicant apparently apprehends that the amounts referred to above could be sought to be brought to tax as "fees for technical services" as defined in Explanation 2 to Clause (vii) of Sub-section (1) of Section 9 of the Act or in paragraph 4 of article 13 of the Avoidance of Double Taxation Agreement between India and the United Kingdom (DTAA). The Department's case as set out in the reply sent by the Assistant Commissioner of Income-tax in his letter dated March 27, 1996, which was also the stand taken by him at the time of hearing before us, is that the DECTA is receiving consultancy charges for providing various kinds of technical and managerial services to the Indian companies and that these charges clearly constitute "fees for technical services" within the meaning of the Act as well as of the DTAA.

18. For the reasons discussed above, the Authority makes the following ruling on the questions raised by the applicant :

ruling Question Answer (1) Whether the amount of contribution received/ receivable to recover part of the cost of the technical assistance provided by the applicant under the provi-sions of its aid programme to the companies assisted by it in India is income of the applicant under the pro-visions of the Income-tax Act and chargeable to tax ?

No (2) Whether, the  amount of contribution received/ receivable to recover part of the cost of the technical assistance provided by the applicant under the provi-sions of its aid programme to the companies assisted by it in India is fees for technical services as defined in Explanation 2 to clause (vii) of sub-section (1) of sec-tion 9 of the Income-tax Act or in article 13. para. 4 of the Avoidance of Double Taxation Agreement with India and U. K. No (5) Even if the amount of contribution referred to in question No. 2 be assumed to be in the nature of technical fees, will such fee be chargeable to tax in India keeping the memorandum of articles of associ-ation of the applicant in view ?"