Make available test under the India-USA DTAA excluded advisory receipts and conduit reimbursements from taxability.

Under the India-USA DTAA, intra-group advisory or technical services are taxable as fees for included services only if they make available technical knowledge, experience, skill, know-how or processes, or involve transfer of a technical plan or design; mere rendering of advice is insufficient. On the facts, the services were advisory and no durable know-how was made available, so the receipts did not fall within the treaty definition and were also not taxable as business profits absent a permanent establishment in India. Pure reimbursements of third-party expenses routed through the assessee as a conduit, without any profit element or income in its hands, were likewise outside the scope of fees for included services. The additions were deleted.

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Issues: (i) Whether amounts received from a group company for intra-group services were taxable as fees for included services under the India-USA DTAA. (ii) Whether charge-back receipts representing reimbursements of third-party expenses were taxable in the hands of the assessee as fees for included services.

Issue (i): Whether amounts received from a group company for intra-group services were taxable as fees for included services under the India-USA DTAA.

Analysis: Under Article 12(4)(b) of the India-USA DTAA, technical or consultancy services are taxable as fees for included services only if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or design. Mere rendering of technical or advisory services is not enough. The services in question were found to be advisory in nature and nothing was shown to have been made available to the Indian recipient in a durable or usable form. The receipts therefore did not satisfy the treaty test, and they also could not be taxed as business profits in the absence of a permanent establishment in India.

Conclusion: The receipts were not taxable as fees for included services, and the addition was deleted in favour of the assessee.

Issue (ii): Whether charge-back receipts representing reimbursements of third-party expenses were taxable in the hands of the assessee as fees for included services.

Analysis: The charge-back amounts were found to be pure reimbursements of actual third-party expenses incurred by the assessee as a conduit for the group company, without any profit element and without the assessee itself rendering the underlying services. Taxability had to be examined, if at all, in the hands of the actual service provider and not in the hands of a mere intermediary. On the facts, the assessee was not the recipient of any income from these reimbursements, and the treaty provisions governing fees for included services were not attracted.

Conclusion: The reimbursements were not taxable in the hands of the assessee, and the additions were deleted in favour of the assessee.

Final Conclusion: The Tribunal held that intra-group service receipts were outside the ambit of fees for included services under the treaty, while pure reimbursements routed through the assessee as a conduit were not taxable in its hands. The revenue appeals were dismissed, and the assessee's appeals were allowed for the later assessment years, with the remaining cross-objections disposed of accordingly.

Ratio Decidendi: Under the India-USA DTAA, technical or consultancy services are taxable only when they make available technical knowledge, experience, skill, know-how, or processes to the recipient, and a mere reimbursement received by a conduit without any income element is not taxable in the conduit's hands.

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