Make available test under the India-UK DTAA denied withholding tax on non-resident consultant payments for project studies.

Payments for port-project studies and report preparation to a non-resident consultant were analysed under the India-UK DTAA to determine whether they constituted fees for technical services. The material point was that the consultant only prepared preliminary studies and did not transfer technical knowledge, skill, know-how or a process so as to enable the payer to apply it independently in future. Because the treaty definition is narrower than the domestic definition, the wider scope of section 9(1)(vii) did not govern. The payment therefore failed the "make available" test, was not chargeable as fees for technical services, and no tax was required to be deducted at source under section 195.

---

---

Issues: Whether the payment made to the non-resident consultant for morphological, sedimentation, navigation and mooring studies constituted fees for technical services under Article 13(4)(c) of the India-UK DTAA so as to attract deduction of tax at source under section 195 of the Income-tax Act, 1961.

Analysis: The services were limited to preparation of reports and preliminary studies concerning the proposed port project. The agreement and surrounding facts showed that the recipient was not enabled to independently apply any technical knowledge, skill, know-how or process in future. The studies resulted in an assessment and report, but no technical expertise was transmitted in a manner that made it available to the assessee. As the treaty definition of fees for technical services is narrower and prevails over the domestic provision, the payment could not be treated as taxable merely because it fell within the wider domestic concept under section 9(1)(vii).

Conclusion: The payment did not satisfy the "make available" requirement and was not chargeable as fees for technical services under Article 13(4)(c) of the India-UK DTAA; therefore, no obligation to deduct tax under section 195 arose and the assessee could not be treated as an assessee in default under sections 201(1) and 201(1A).

---