Make available test not met for supply management fees, so treaty protection and no withholding applied.

Supply management service fees paid to a UK resident were not fees for technical services or royalty under Article 13 of the India-UK treaty because the services involved managerial and sourcing support only, with no transfer of technical knowledge, know-how, process, or intellectual property, and the "make available" test was not met. As no permanent establishment existed in India, the receipts were not taxable in India under the treaty. Since the underlying sum was not chargeable to tax in India, the Indian payer had no obligation to deduct tax at source under section 195 of the Income-tax Act, 1961.

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Issues: (i) Whether supply management service fees received from the Indian company were chargeable as fees for technical services or royalty under Article 13 of the India-UK treaty; (ii) whether the absence of a permanent establishment in India rendered the receipts non-taxable in India; (iii) whether the Indian payer was required to deduct tax at source under section 195 of the Income-tax Act, 1961.

Issue (i): Whether supply management service fees received from the Indian company were chargeable as fees for technical services or royalty under Article 13 of the India-UK treaty.

Analysis: The services consisted of supply management, supplier pricing, competitive sourcing support, delivery coordination, and related managerial assistance. They did not involve the transfer of any technical knowledge, experience, skill, know-how, process, or technical design to the recipient. The services also did not concern the use of, or right to use, any copyright, patent, trademark, design, model, plan, secret formula, process, or industrial equipment. The treaty requirement of "make available" was not satisfied because the Indian company was not enabled to apply any technology independently after the contract ended.

Conclusion: The receipts were neither fees for technical services nor royalty under Article 13 of the India-UK treaty.

Issue (ii): Whether the absence of a permanent establishment in India rendered the receipts non-taxable in India.

Analysis: Under the treaty, business profits of a non-resident are taxable in India only if attributable to a permanent establishment in India. On the facts found, no permanent establishment existed in India. Once the receipts were held not to be fees for technical services or royalty, there remained no other treaty basis for taxation in India.

Conclusion: The receipts were not taxable in India.

Issue (iii): Whether the Indian payer was required to deduct tax at source under section 195 of the Income-tax Act, 1961.

Analysis: Section 195 applies only where the sum paid is chargeable under the Act. Since the underlying receipts were held not chargeable to tax in India under the treaty and there was no permanent establishment, the remittance did not attract a withholding obligation.

Conclusion: The Indian payer was not required to deduct tax at source under section 195 of the Income-tax Act, 1961.

Final Conclusion: The advance ruling held that the supply management service fees were treaty-protected receipts not taxable in India, and no withholding obligation arose on the Indian payer.

Ratio Decidendi: Managerial or supply management services are not taxable as fees for technical services unless the service provider makes available technical knowledge, skill, know-how, or a technical design to the recipient, and in the absence of royalty characteristics or a permanent establishment, such receipts are not chargeable in India.

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