Make available requirement under the India-France DTAA blocked tax on IT support and management service receipts.

Receipts from information technology support and management services were examined under the Income-tax Act, 1961 and the India-France DTAA. The services were treated as a mixed bundle of managerial and technical support functions, but they did not constitute royalty because they did not involve imparting information concerning technical, industrial, commercial or scientific knowledge, experience or skill. Although the receipts could otherwise fall within the domestic definition of fees for technical services, the more beneficial treaty applied, and the most favoured nation clause imported the make available requirement from the India-UK DTAA. As the services did not make available technical knowledge, experience, skill or know-how for independent future use, the receipts were not taxable as fees for technical services.

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Issues: Whether receipts from information technology support services and management services were taxable as royalty or fees for technical services under the Income-tax Act, 1961 and the India-France DTAA.

Analysis: The services rendered were found to be a mixed bundle of managerial and technical support functions. On the royalty question, the receipts did not amount to imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, and therefore did not fall within the royalty definition in section 9(1)(vi). On the fees for technical services question, the receipts may fall within section 9(1)(vii) of the Act, but the treaty had to be applied if more beneficial. By applying the most favoured nation clause in the India-France DTAA protocol and reading it with the India-UK DTAA, the relevant treaty scope was limited by the make available requirement. The services in question did not make available technical knowledge, experience, skill or know-how to the Indian entity for future independent use.

Conclusion: The receipts were neither royalty nor taxable fees for technical services under the applicable treaty framework and could not be brought to tax in the assessee's hands.

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