Treaty royalty and make-available test: bandwidth and maintenance payments were not taxable as royalty or technical fees.

Bandwidth service payments were not royalty under the India-Singapore DTAA or section 9(1)(vi) because the arrangement involved standard access services, not use of equipment or a process, and the domestic-law enlargement in Explanation 6 could not override the treaty definition. Article 3(2) did not permit importing the domestic meaning of "process" into an already defined treaty term. Operations and maintenance charges were also not fees for technical services because the services were routine and did not make available technical knowledge, skill, know-how, or processes to the recipient. The withholding demand therefore failed on both heads and the appellate relief was affirmed.

---

---

Issues: (i) Whether consideration paid for bandwidth services was royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement, and whether Explanation 6 and Article 3(2) required import of the domestic-law meaning of "process" into the treaty; (ii) Whether consideration paid for operations and maintenance services constituted fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Issue (i): Whether consideration paid for bandwidth services was royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement, and whether Explanation 6 and Article 3(2) required import of the domestic-law meaning of "process" into the treaty.

Analysis: The payment was for access to standard bandwidth services and did not involve use of, or right to use, any equipment or a process controlled by the service provider. The treaty definition of royalty was narrower than the domestic provision, and the domestic amendment in Explanation 6 could not be used to expand the treaty meaning. Article 3(2) did not justify importing the domestic-law definition of "process" into a treaty term that was already defined in the agreement, and the attempted ambulatory reading would amount to an impermissible unilateral treaty override.

Conclusion: The payment was not royalty under the treaty or the Act, and the issue is decided against the Revenue and in favour of the assessee.

Issue (ii): Whether consideration paid for operations and maintenance services constituted fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The maintenance services were routine and did not make available technical knowledge, experience, skill, know-how, or processes enabling the recipient to apply the technology independently. No transfer of technology or development and transfer of a technical plan or design was shown, and the treaty condition for fees for technical services was therefore not met.

Conclusion: The payment did not constitute fees for technical services, and the issue is decided against the Revenue and in favour of the assessee.

Final Conclusion: The tax withholding demand failed on both heads, and the relief granted by the first appellate authority was affirmed.

Ratio Decidendi: A domestic-law enlargement of the meaning of royalty cannot be imported into a treaty that already defines the term, and service payments are taxable as fees for technical services only where the treaty's make-available condition is satisfied.

---