Make available test defeats withholding tax on non-resident service payments under the India-US treaty.

Payments to non-residents for conference speaking and clinical research testing were held not to be fees for included services under the India-US treaty because the services did not make available technical knowledge, experience, skill, know-how, or processes to the payer. The management expert merely shared business experience and strategy at a conference, and the clinical research organisations applied their own expertise to generate reports without transferring reusable know-how. As the treaty test was not met, no tax withholding obligation arose under section 195, and the related demand under sections 201 and 201(1A) could not stand.

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Issues: (i) Whether the payment made to the foreign management expert for addressing a conference in India was taxable in India as fees for included services and attracted withholding tax under section 195 of the Income-tax Act, 1961; (ii) Whether payments made to foreign clinical research organisations for bio-equivalence, analytical and related testing services were taxable in India as fees for included services and attracted withholding tax under section 195 of the Income-tax Act, 1961.

Issue (i): Whether the payment made to the foreign management expert for addressing a conference in India was taxable in India as fees for included services and attracted withholding tax under section 195 of the Income-tax Act, 1961.

Analysis: Under the India-US tax treaty, fees for included services are confined to technical or consultancy services that make available technical knowledge, experience, skill, know-how, or processes. The payment in question related to a two-day conference addressed by a management expert, and the material showed that the service consisted of sharing management experience and business strategy rather than imparting technical knowledge. Since no technical knowledge was made available to the payer so as to enable independent future application, the payment did not fall within the treaty definition.

Conclusion: The amount paid was not taxable in India as fees for included services, and the assessee was not liable to deduct tax at source; the addition under sections 201 and 201(1A) was unsustainable.

Issue (ii): Whether payments made to foreign clinical research organisations for bio-equivalence, analytical and related testing services were taxable in India as fees for included services and attracted withholding tax under section 195 of the Income-tax Act, 1961.

Analysis: The CROs conducted tests on drug samples and supplied analysis reports, but did not transfer technical know-how, skill, or processes to the assessee. The services were essentially commercial in nature, with the CROs applying their own expertise to prepare reports, and the assessee was not enabled to perform the same work independently in the future. On that basis, the payments did not satisfy the make available requirement under the relevant treaty provisions and were outside the scope of fees for included services.

Conclusion: The remittances to the CROs were not chargeable to tax in India, no obligation to deduct tax at source arose, and the revenue's challenge to the relief granted by the first appellate authority failed.

Final Conclusion: The assessee succeeded on both substantive issues, while the revenue's appeal was rejected, leaving the withholding-tax demand deleted in part and sustained only to the limited extent not contested in this outcome extraction.

Ratio Decidendi: Payments to non-residents for services are taxable as fees for included services only where the services are technical or consultancy in nature and make available technical knowledge, experience, skill, know-how, or processes to the recipient.

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