Fixed place PE and make available test failed as managerial services were not taxable and no India business presence existed

A fixed place permanent establishment under Article 5(1) of the Indo-Sweden DTAA was not established because the assessee had no place of disposal in India from which it could conduct business, and the earlier tribunal view on identical facts was followed. The managerial services were not taxable as fee for technical services because they did not make available technical knowledge, skill or know-how to the recipient, nor enable independent future application. On both issues, the ruling remained in favour of the assessee and the revenue's challenge failed.

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Issues: (i) whether the assessee's business presence in India constituted a fixed place permanent establishment under Article 5(1) of the Indo-Sweden DTAA; (ii) whether the managerial services rendered by the assessee were taxable as fee for technical services under the make available clause.

Issue (i): whether the assessee's business presence in India constituted a fixed place permanent establishment under Article 5(1) of the Indo-Sweden DTAA.

Analysis: The issue was treated as covered by the coordinate bench in the assessee's own case for an earlier assessment year. The earlier decision had found that the assessee had no place of disposal in India from which it could conduct its business and had directed deletion of the attribution made on the basis of permanent establishment. As there was no material change in facts or the legal position, the same view was followed.

Conclusion: The finding of fixed place permanent establishment was not sustained and the issue was decided in favour of the assessee.

Issue (ii): whether the managerial services rendered by the assessee were taxable as fee for technical services under the make available clause.

Analysis: The issue was again considered covered by the earlier tribunal order. The applicable test was whether the services transmitted technical knowledge, skill or know-how so that the recipient could apply it independently in future. On the facts, the intermediary or managerial services did not make available any technical knowledge or skill to the recipient, and the recipient was not enabled to apply the technology independently. The services therefore did not satisfy the make available requirement.

Conclusion: The receipts were not taxable as fee for technical services and the issue was decided in favour of the assessee.

Final Conclusion: The assessee succeeded on both substantive issues and the revenue failed on its challenge, resulting in a decision that is overall in favour of the assessee.

Ratio Decidendi: Where earlier binding tribunal findings on identical facts show absence of disposal of business place in India and the services do not make available technical knowledge or skill to the recipient, neither a fixed place permanent establishment nor fee for technical services taxation can be sustained.

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