Treaty make-available test excludes intermediary services from technical fees; offshore supply income is taxable only for India-linked operations.

Under the Indo-Sweden treaty, intermediary services such as marketing, sales and project management were treated as managerial or administrative support and not as fee for technical services because they did not make technical knowledge or skill available for independent future use. The treaty's most favoured nation benefit was applied, and the receipts were therefore outside the fee for technical services charge. On the PE issue, offshore supplies under contract BS-02 were made from outside India and only income attributable to operations carried out in India can be taxed in India. The alleged PE was not sustained on the existing record, subject only to limited verification of whether any employee had been seconded to India.

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Issues: (i) Whether fees received for intermediary services were taxable as fee for technical services under the Indo-Sweden treaty by application of the most favoured nation clause and the make available condition; (ii) Whether BTIN constituted a permanent establishment in India for the assessee in relation to offshore supplies under contract BS-02, and whether any income was attributable to such alleged PE.

Issue (i): Whether fees received for intermediary services were taxable as fee for technical services under the Indo-Sweden treaty by application of the most favoured nation clause and the make available condition.

Analysis: The treaty benefits available to the Swedish resident were held applicable, and the scope of fee for technical services was read in the light of the imported make available requirement. The intermediary services consisted of marketing, sales, project management and related support, but they did not transmit technical knowledge or skill to the recipient so as to enable independent application of such knowledge in future. The services were therefore treated as managerial or administrative support rather than technical services satisfying the treaty threshold.

Conclusion: The receipts from intermediary services were not taxable as fee for technical services and the finding of the first appellate authority on this issue was upheld.

Issue (ii): Whether BTIN constituted a permanent establishment in India for the assessee in relation to offshore supplies under contract BS-02, and whether any income was attributable to such alleged PE.

Analysis: The offshore supplies were made from outside India and the contractual arrangement split the offshore and onshore functions between the consortium members. The earlier year's decision in the assessee's own case was followed, and the settled principle applied was that only income attributable to operations carried out in India can be taxed in India. At the same time, the record required verification of whether any employee had been seconded to India for the project, which was left for the Assessing Officer to examine before deleting the PE-related addition.

Conclusion: The PE finding was not finally sustained on the existing record, and the matter was sent back only for limited verification of secondment before consequential deletion of the addition if no secondment was found.

Final Conclusion: The departmental challenge to deletion of the fee for technical services addition failed, while the assessee obtained relief on the PE issue subject to limited verification, resulting in a partial success for the assessee.

Ratio Decidendi: Under the Indo-Sweden treaty, intermediary services are taxable as technical services only if they satisfy the make available threshold, and offshore supply income is taxable in India only to the extent attributable to operations carried out in India.

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