Fees paid by a person resident in India to a technical lab in a foreign country for analysis of samples and ores would be treated as income deemed to accrue in India in view of the provisions of section 9(1)(vii)(b) of the Income Tax Act which provides that technical fees paid by an Indian resident is taxable if the fee is paid in respect of services utilized in a business carried on by such person in India.

The Authority for Advance Rulings (AAR) has so held on an application by an Indian company South West Mining Ltd. (SWM). The company is engaged in prospecting and extraction of minerals, metals, ores, etc. During the course of its business, SWM gets analysis of samples and ores conducted by a technical lab of the consultant Met-Chem, Canada Inc. All the tests and analysis are conducted in Canada and reports are sent by Met-Chem to India.

The AAR has observed that though the consultant carried on analysis and lab tests of samples collected in India and prepared the reports outside India, the services in the form of reports were utilized in India in the business of the applicant in India and earned income from a source within India, thus falling within the provisions of section 9(1)(vii)(b) of Income Tax Act and taxable in India.