Make available test under the India-UK treaty: general training did not create taxable fees for technical services.

Fees for in-house employee training and market-development training paid to a UK resident are taxable in India as fees for technical services under the India-UK treaty only if the services make available technical knowledge, experience, skill, know-how or processes, meaning the recipient is enabled to apply the technology itself. General training, even if specialised or useful, does not satisfy that treaty threshold unless it results in a transfer of technology. On the stated facts, the training was of a general nature and did not enable the assessee to apply any technical knowledge; the revenue also failed to establish that the treaty condition was met. Accordingly, the domestic charging provision could not be invoked, and the withholding demand was not sustainable.

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Issues: Whether training fees paid to a UK resident for in-house employee training and market-development training constituted fees for technical services taxable in India under the India UK tax treaty on the basis that the services made available technical knowledge, experience, skill, know-how or processes.

Analysis: The governing test under the treaty is whether the recipient is enabled to apply the technology contained in the service, which requires a transfer of technology and not merely the provision of technical or training services. General training, even if useful or specialised, does not satisfy the treaty condition unless it results in such transfer. On the facts, the training described as in-house training of IT and medical staff and market awareness and development training was of a general nature, and nothing showed that it enabled the assessee to apply any technical knowledge or that any technology was transferred. The revenue did not discharge the burden of establishing that the services met the treaty threshold. In a treaty situation, the domestic provision cannot be invoked where the treaty test is not satisfied.

Conclusion: The training fees were not taxable as fees for technical services under Article 13(4)(c) of the India UK Double Taxation Avoidance Agreement, and the tax withholding demand under section 201 read with section 195 of the Income-tax Act, 1961 was not sustainable.

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