Most favoured nation clause imports the "make available" test, excluding treaty tax on technical service fees.

Management service fees received by a Swedish tax resident were examined under the India-Sweden treaty and its protocol, with section 90(2) allowing reliance on the more beneficial treaty provisions. The most favoured nation clause was applied to import the narrower India-Portugal treaty standard for fees for technical services, under which services are taxable only if they make available technical knowledge, experience, skill, know-how or processes. Because the services did not satisfy the "make available" condition, the receipts could not be taxed in India as fees for technical services under the India-Sweden treaty read with the protocol.

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Issues: Whether the management service fees received by the Swedish tax resident were taxable in India as fees for technical services under the India-Sweden tax treaty, and whether the most favoured nation clause in the protocol entitled the assessee to the more restrictive "make available" condition from the India-Portugal treaty.

Analysis: The income was otherwise taxable under the Act, but the treaty provisions had to be applied because section 90(2) permits the assessee to rely on the more beneficial treaty provisions. The India-Sweden protocol provided that if India, in a later convention with an OECD member state, limited source taxation on royalties or fees for technical services to a lower rate or a more restricted scope, the same rate or scope would apply under the India-Sweden treaty. The India-Portugal treaty contained the more restricted formulation that technical services are taxable only when they "make available" technical knowledge, experience, skill, know-how or processes enabling the recipient to apply the technology. Applying the protocol and the principle of most favoured nation treatment, the scope restriction from the India-Portugal treaty was held to be imported into the India-Sweden treaty. On the facts, the services did not satisfy that condition.

Conclusion: The receipts could not be brought to tax in India as fees for technical services under the India-Sweden treaty read with its protocol, and the assessee succeeded.

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