Make-available test under the India-U.S.A. DTAA excluded calibration and testing payments from fee for technical services.

Payments to a U.S. non-resident for calibration and testing of ultrasonic meters were not fee for technical services because the service provider only tested calibration and issued a correctness report, without making available technical knowledge, skill, or process to the recipient. On those facts, the Article 12(4) make-available test under the India-U.S.A. DTAA was not satisfied, so the remittance was not chargeable as FTS. Section 195 was therefore not attracted, and there was no liability under Sections 201(1) and 201(1A).

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Issues: Whether the payments made to the U.S. non-resident for calibration and testing of ultrasonic meters constituted fee for technical services so as to attract deduction of tax at source under Section 195 of the Income-tax Act, 1961 and consequent liability under Section 201(1) and Section 201(1A) of the Income-tax Act, 1961.

Analysis: The payment was for obtaining a calibration correctness report from the foreign service provider. The findings accepted by the first appellate authority showed that the service provider only tested the calibration and issued a report, without making available the underlying technical process or transfer of technology to the assessee. On these facts, the service did not satisfy the make available requirement under Article 12(4) of the India-U.S.A. DTAA. Since the Revenue did not bring material to dislodge those findings, the payment could not be treated as fee for technical services and the assessee could not be treated as an assessee in default.

Conclusion: The remittance was not chargeable as fee for technical services under the treaty and Section 195 was not attracted; the assessee was not liable under Section 201(1) or Section 201(1A).

Ratio Decidendi: For Article 12 of the India-U.S.A. DTAA, technical services are taxable only when the service makes available technical knowledge, experience, skill or process enabling the recipient to apply it independently; mere testing or certification without transfer of such technology does not satisfy the test.

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