Management support receipts not taxable as fee for technical services absent make available of technical knowledge.

Management support receipts for administration, planning, marketing, logistics and related business functions were treated as managerial in substance. Under the India-Belgium treaty protocol and the India-UK treaty definition, fee for technical services covered only technical or consultancy services, and consultancy services required that technical knowledge, experience, skill, know-how or processes be made available so the recipient could apply them independently. No material showed that this make available condition was satisfied, and the attribution of part of the receipts to consultancy services was unsupported. The receipt was therefore not taxable as fee for technical services, and the addition was deleted.

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Issues: Whether the amount received for providing management support services was taxable as fee for technical services under the India-Belgium tax treaty read with the India-UK tax treaty, and whether the make available condition under the restrictive treaty definition was satisfied.

Analysis: The amount was received for administration, management, marketing, business planning, product management, business development, logistics, distribution planning, and related support functions under the service agreement. The scope of services indicated assistance in day-to-day business operations and was held to be managerial in nature. Under the India-Belgium treaty, the protocol allowed the more restricted scope of fee for technical services available under a later OECD treaty. Under the India-UK treaty, fee for technical services covered only technical or consultancy services, and consultancy services qualified only if technical knowledge, experience, skill, know-how, or processes were made available to the recipient so that it could apply them independently. No material was found to show that such make available condition was satisfied, and the attribution of 50% of receipts to consultancy services was held to be purely estimated and unsupported.

Conclusion: The receipt was not taxable as fee for technical services and the addition sustained by the first appellate authority was deleted.

Final Conclusion: The assessee succeeded on the treaty characterization of the management support receipts, and the full addition made on that basis was set aside.

Ratio Decidendi: Where management support services are found to be managerial in substance and the relevant treaty excludes managerial services from fee for technical services, the receipt is not taxable as FTS unless the taxpayer is shown to have made available technical knowledge, experience, skill, know-how, or processes to the recipient.

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