Make available test under the India-Sweden treaty guided treatment of consultancy, SAP licence and IT support receipts.

Under the India-Sweden treaty, consultancy receipts were analysed on the make available test, and project leadership, planning and coordination support was held not taxable as fees for technical services because technical knowledge was not made available for independent future use. SAP licence charges paid on a cost-to-cost reimbursement basis were treated as lacking an income element and were not characterised as royalty. IT support services connected with SAP implementation were likewise held not taxable as fees for technical services or royalty, since incidental benefit and efficiency support did not satisfy the make available requirement or the treaty's royalty linkage. The appeal was partly allowed, with additions on these items deleted and one reimbursement issue remanded.

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Issues: (i) Whether consultancy services were taxable as fees for technical services under the India-Sweden treaty; (ii) Whether SAP licence charges were taxable as royalty; (iii) Whether IT support services were taxable as fees for technical services or royalty.

Issue (i): Whether consultancy services were taxable as fees for technical services under the India-Sweden treaty.

Analysis: The consultancy activity was found to be in the nature of project leadership, planning, coordination, and execution support for setting up the manufacturing facility. Applying the treaty test, the decisive question was whether technical knowledge or skills were made available to the recipient so that it could perform similar functions independently in future. The earlier coordinate bench decisions in the assessee's own case were followed, and the CBDT circular on the MFN clause was held not to affect the year under consideration.

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

Issue (ii): Whether SAP licence charges were taxable as royalty.

Analysis: The receipts were treated as reimbursement on cost-to-cost basis for SAP software licences purchased from a third party. The absence of any income element was held decisive, and the earlier coordinate bench ruling in the assessee's own case was applied. On those facts, the payment could not be characterised as royalty in the hands of the assessee.

Conclusion: The SAP licence charges were held not taxable as royalty and the issue was decided in favour of the assessee.

Issue (iii): Whether IT support services were taxable as fees for technical services or royalty.

Analysis: The IT support services were examined in light of the treaty and the earlier decisions in the assessee's own case. It was held that incidental benefit, efficiency improvement, or support connected with SAP implementation did not satisfy the make available requirement. The services were also not treated as ancillary and subsidiary to royalty within the treaty framework.

Conclusion: The IT support receipts were held not taxable as fees for technical services or royalty and the issue was decided in favour of the assessee.

Final Conclusion: The additions on consultancy services, SAP licence charges, and IT support services were deleted, while the reimbursement issue was sent back for fresh consideration, resulting in a partly allowed appeal.

Ratio Decidendi: Under the India-Sweden treaty, technical or consultancy receipts are taxable as fees for technical services only if the service provider makes available technical knowledge, skills, or know-how enabling the recipient to perform the same services independently in future; cost-to-cost reimbursements without income element are not taxable as royalty or fees for technical services.

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