Make available test under treaty services: shared technical know-how led to taxation outside section 44BB.

Payments to a non-resident were treated as fees for included services under Article 12 of the India-Canada DTAA because the contract involved collaborative research, training and maintenance, and the non-resident's technical know-how was made available to the assessee's personnel. The "make available" condition was therefore satisfied. The receipts were also found outside section 44BB because that provision applies to services or facilities connected with prospecting for, or extraction or production of, mineral oils, whereas these receipts were in the nature of technical services rather than oilfield services. The treaty-based taxability was thus affirmed and section 44BB was held inapplicable.

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Issues: (i) Whether the payments received by the non-resident were taxable as fees for included services under Article 12 of the India-Canada Double Taxation Avoidance Agreement; (ii) Whether, if taxable, the receipts were assessable under section 44BB of the Income-tax Act, 1961.

Issue (i): Whether the payments received by the non-resident were taxable as fees for included services under Article 12 of the India-Canada Double Taxation Avoidance Agreement.

Analysis: The contract contemplated collaborative research, participation, training and maintenance services. The scope of work showed that the non-resident's know-how and technical expertise were shared with the assessee's personnel, and the arrangement was not confined to mere provision of services without transfer of technical knowledge. The requirement of "make available" under Article 12(4) was therefore satisfied.

Conclusion: The receipts were taxable as fees for included services under Article 12 of the India-Canada Double Taxation Avoidance Agreement, against the assessee.

Issue (ii): Whether, if taxable, the receipts were assessable under section 44BB of the Income-tax Act, 1961.

Analysis: Section 44BB applies to non-residents engaged in providing services or facilities in connection with prospecting for, or extraction or production of, mineral oils, where the consideration is not in the nature of technical services. The non-resident here was not engaged in drilling or extraction operations, and the receipts were found to fall within the ambit of technical services under section 9(1)(vii). In that situation, section 44BB was held inapplicable.

Conclusion: The receipts were not taxable under section 44BB of the Income-tax Act, 1961, against the assessee.

Final Conclusion: Both appeals were rejected and the additions made by the tax authorities were sustained.

Ratio Decidendi: Where the contract shows that technical know-how is shared and made available through collaborative services and training, the payment is taxable as fees for included services under the treaty and cannot be brought within section 44BB if it is in the nature of technical services rather than services connected with extraction or production of mineral oil.

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