Make-available test under India-US DTAA not satisfied where technical input was not handed over for independent future use.

Payments to a US resident service provider are taxable as fees for included services under Article 12(4) of the India-US DTAA only if they make available technical knowledge, experience, skill, know-how or processes to the recipient for independent future use. Services for evaluating LNG vaporization options and recommending a suitable scheme involved technical expertise, but the record did not show that any technology or know-how was made available to the assessee. Mere use of technical input by the provider was insufficient, so no tax was deductible at source and the disallowance under section 40(a)(i) was deleted.

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Issues: Whether the payment made to the non-resident service provider was chargeable as fees for technical services or fees for included services so as to require deduction of tax at source and attract disallowance under section 40(a)(i).

Analysis: The payment related to evaluation of LNG vaporization options and recommendation of a suitable scheme. Though such services involved technical expertise, the applicable India-US DTAA governed the taxation of the non-resident. Under Article 12(4), services are taxable as fees for included services only if they make available technical knowledge, experience, skill, know-how, or processes to the recipient so that the recipient can apply the technology independently in future. The nature of the services rendered did not show that any such technical knowledge or know-how was made available to the assessee. Mere use of technical input by the service provider was insufficient to satisfy the treaty test.

Conclusion: The payment did not constitute fees for included services under the India-US DTAA and no tax was deductible at source; the disallowance under section 40(a)(i) was rightly deleted.

Ratio Decidendi: For payments to a US resident service provider, technical or consultancy services are taxable in India under Article 12(4) of the India-US DTAA only when they make available technical knowledge, experience, skill, know-how, or processes to the recipient.

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