Make available test under India-Singapore DTAA governs taxability of consultancy and design services for withholding purposes.

Under the India-Singapore DTAA, consultancy and project-related design services are taxable as fees for technical services only if they make available technical knowledge, experience, skill, know-how or processes so the recipient can apply them independently in future, or if they involve transfer of a technical plan or design. On the stated facts, the services were project-specific and no material showed that any such technical knowledge or design was made available to the Indian payer. The non-resident also had no permanent establishment in India, supporting the position that no tax was required to be withheld under section 195 and that consequential demand under sections 201(1) and 201(1A) would not arise.

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Issues: Whether the payment made to the Singapore-based non-resident entity for consultancy and related project services was taxable as royalty or fees for technical services under the India-Singapore DTAA, and whether the assessee was liable to deduct tax at source under section 195, with consequential demand under sections 201(1) and 201(1A) of the Income-tax Act, 1961.

Analysis: The payment was examined in the light of Article 12 of the DTAA and the applicable treaty test that services qualify as fees for technical services only where technical knowledge, experience, skill, know-how or processes are made available so that the recipient can apply them independently in future, or where there is a transfer of a technical plan or technical design. The services in question were found to be project-specific consultancy and design-related services. The reasoning accepted that no technical knowledge or design was made available to the assessee for independent future use, and no material showed that the treaty conditions were satisfied. In these circumstances, the payment could not be treated as royalty or fees for technical services, and the non-resident recipient's absence of a permanent establishment in India reinforced the assessee's case against withholding liability.

Conclusion: The payment was not chargeable as royalty or fees for technical services under the DTAA, and the assessee was not liable to deduct tax at source under section 195. The demand raised under sections 201(1) and 201(1A) was unsustainable.

Ratio Decidendi: Under the India-Singapore DTAA, consultancy or design services are taxable as fees for technical services only if they make available technical knowledge, skill, know-how or processes enabling independent use by the recipient; absent that condition, no withholding liability arises under section 195 on such payments to a non-resident without a permanent establishment in India.

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