Make available test under India-UK DTAA excluded support services from fees for technical services, shifting taxation to business profits.

Marketing, sales support, account handling and managerial support services rendered by a non-resident were analysed under the India-UK DTAA "make available" test. Those services were held not to transmit technical knowledge, skill or experience to the recipient in a usable form, so they did not qualify as fees for technical services under Article 13(4)(c). Because a service permanent establishment in India was accepted, the receipts were instead examined as business profits attributable under Article 7, and the consequential verification of the withholding rate was treated as proper.

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Issues: (i) Whether the amounts payable for marketing and management services rendered by the non-resident fell within fees for technical services under Article 13(4)(c) of the India-UK DTAA on the "make available" test. (ii) Whether, in view of the service permanent establishment of the non-resident in India, the receipts were taxable as business profits under Article 7 of the India-UK DTAA and the withholding rate had to be worked out accordingly.

Issue (i): Whether the amounts payable for marketing and management services rendered by the non-resident fell within fees for technical services under Article 13(4)(c) of the India-UK DTAA on the "make available" test.

Analysis: The expression "make available" was applied in the settled sense that the recipient must be enabled to perform the service itself in future without recourse to the service provider, and the technical knowledge, skill or experience must endure with the recipient in a usable form. The services in question were found to be in the nature of marketing, sales support, account handling and managerial support, and not services that transmitted technical knowledge or skill so as to satisfy the treaty test.

Conclusion: The receipts did not constitute fees for technical services and could not be taxed under Article 13(4)(c).

Issue (ii): Whether, in view of the service permanent establishment of the non-resident in India, the receipts were taxable as business profits under Article 7 of the India-UK DTAA and the withholding rate had to be worked out accordingly.

Analysis: The existence of a service permanent establishment in India was accepted, and the income attributable to that permanent establishment was held to fall for consideration under Article 7 as business profits. The direction to verify the assessee's working of the embedded income rate and to apply the rate after examination was treated as a permissible consequential exercise rather than an error.

Conclusion: The receipts were to be examined under Article 7, and the direction for verification of the withholding rate was upheld.

Final Conclusion: The appellate order was sustained in full, and the revenue's challenges to the treaty characterization and the consequential withholding direction failed.

Ratio Decidendi: Under the India-UK DTAA, professional or support services are taxable as fees for technical services only when they make available technical knowledge, skill or experience to the recipient, and where that test is not met, attribution of profits to a service permanent establishment proceeds under Article 7.

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