Treaty taxation of offshore service receipts turns on the 'make available' test and absence of a permanent establishment.

Receipts for services rendered outside India were analysed under the India-USA tax treaty and characterised as not constituting fees for technical services because the payer did not receive any technical knowledge, skill, know-how, or process that could be independently applied. The article applies the treaty's "make available" requirement and notes that the same treatment had been accepted in earlier years through mutual agreement procedure and prior appellate decisions. It further states that, absent a permanent establishment in India, the receipts could not be taxed as business profits in India.

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Issues: Whether the receipts from borrowed services rendered outside India constituted fees for technical services or business profits, and whether they were taxable in India under the India-USA tax treaty.

Analysis: The services consisted of supplying data, information, and advisory support from outside India. They did not transfer technical knowledge, skill, know-how, or any process that could be independently applied by the Indian entity, and therefore did not satisfy the treaty requirement of making available technical expertise. The dispute had already been resolved in the assessee's favour for earlier years under the mutual agreement procedure, and the same consistent treatment was followed in prior appellate decisions. As the assessee had no permanent establishment in India, the receipts could not be taxed as business profits either.

Conclusion: The receipts were not fees for technical services and were taxable, if at all, only as business profits. In the absence of a permanent establishment in India, they were not taxable in India, and the issue was decided in favour of the assessee.

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