Treaty "make available" test limits tax on outsourced bio-analytical services, so no withholding tax arose.

Bio-analytical testing performed outside India by non-resident entities was not taxable as fees for included services because the reports did not make available technical knowledge, experience, skill, know-how or processes to the recipient for independent use. The DTAA, being more beneficial, prevailed over domestic law, so no income arose in India under Article 12(4)(b). As the payment was not chargeable to tax in India, no obligation to deduct tax at source arose under section 195, and the consequential demand under section 201(1) and 201(1A) was unsustainable. The deletion of the demand was upheld.

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Issues: Whether bio-analytical services rendered by non-resident entities were taxable in India as fees for technical services or fees for included services, and whether the payer was liable to deduct tax at source and be treated as an assessee in default.

Analysis: The services were rendered outside India and the non-resident entities had no permanent establishment in India. The decisive question was whether the services made available technical knowledge, experience, skill, know-how or processes to the recipient so that it could apply them independently. On the facts, the reports generated from outsourced bio-analytical testing did not convey the underlying technique or enable the assessee to perform the tests on its own. The provisions of the relevant DTAA, being more beneficial, therefore prevailed over domestic taxability to the extent of the treaty limitation. In the absence of taxable income in India under Article 12(4)(b), the obligation to deduct tax under section 195 did not arise, and consequential demand under section 201 could not survive.

Conclusion: The services were not made available to the assessee and did not constitute fees for included services under the DTAA. The assessee was not liable to deduct tax at source, and the demand raised under sections 201(1) and 201(1A) was unsustainable.

Final Conclusion: The Revenue's challenge failed, and the CIT(A)'s deletion of the demand was upheld.

Ratio Decidendi: Under a treaty provision requiring services to make available technical knowledge or skill, outsourced technical testing does not become taxable merely because it is sophisticated; tax deduction at source arises only where the payment is chargeable to tax in India.

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