Make-available test for treaty services failed, and surcharge and cess could not be added over the treaty rate.

Routine IT support services rendered by a Belgian tax resident to an Indian associate enterprise were held not to constitute fees for technical services under the treaty because the restrictive "make available" test was not satisfied. The tribunal applied the India-Belgium protocol and the imported treaty standard requiring transfer of technical knowledge, skill, know-how or experience enabling independent future use by the recipient; there was no evidence of training or transmission of usable technical knowledge. The receipts were therefore not taxable as fees for technical services. The tribunal also held that surcharge and cess could not be added separately over the treaty rate, as the treaty governed the applicable tax charge.

---

---

Issues: (i) Whether the IT support services rendered to the Indian associate enterprise constituted fees for technical services under the treaty by satisfying the "make available" condition; (ii) Whether surcharge and cess could be levied over and above the treaty rate applicable to such income.

Issue (i): Whether the IT support services rendered to the Indian associate enterprise constituted fees for technical services under the treaty by satisfying the "make available" condition.

Analysis: The assessee, a tax resident of Belgium, rendered routine IT support services from outside India. The applicable treaty framework, read with the most favoured nation clause in the India-Belgium protocol, imported the restrictive "make available" test from the India-Portugal treaty. That test required transfer of technical knowledge, skill, know-how or experience so that the recipient could apply it independently in future without recourse to the service provider. The material on record did not show training of the recipient's personnel or transmission of knowledge enabling independent future use. The services were held to be support services and not services that made available technical knowledge or skill.

Conclusion: The receipts did not constitute fees for technical services under the treaty and the addition was not sustainable.

Issue (ii): Whether surcharge and cess could be levied over and above the treaty rate applicable to such income.

Analysis: The treaty rate for fees for technical services had to be applied as the agreed rate between the contracting states. Since the treaty definition of Indian tax already included surcharge, and the tribunal treated the treaty rate as controlling, surcharge and cess could not be added separately to enhance the treaty rate.

Conclusion: Surcharge and cess could not be levied over and above the treaty rate.

Final Conclusion: The assessment addition treating the IT support receipts as taxable fees for technical services failed, and the tax computation was also erroneous to the extent surcharge and cess were separately applied.

Ratio Decidendi: Technical or consultancy services are taxable as fees for technical services only when they are of a nature that makes available technical knowledge, skill, know-how or experience to the recipient for independent future use, and a treaty rate cannot be mechanically inflated by separately adding surcharge and cess where the treaty governs the tax charge.

---