Make-available test under the India-Singapore DTAA kept marketing support receipts outside Indian tax net.

Under the India-Singapore DTAA, marketing and support services rendered by a non-resident to an Indian subsidiary were not taxable as fees for technical services because the arrangement did not make available technical knowledge, experience, skill, know-how or processes to the recipient. The Indian company received the benefit of the services, but not the underlying capability to perform similar functions independently in future, so the make-available condition was not met. In the absence of a permanent establishment in India, the receipts also could not be taxed as business profits under the treaty. The addition was therefore deleted.

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Issues: Whether the receipts from marketing and support services rendered by the non-resident assessee to the Indian subsidiary were taxable in India as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Singapore DTAA.

Analysis: The service agreement showed that the assessee rendered sales and marketing support through personnel stationed outside India. The services were managerial in character, but the decisive question was whether they made available technical knowledge, experience, skill, know-how or processes to the Indian recipient. The record showed that the Indian company received the benefit of the services, but not the underlying technical knowledge or capability so as to enable it to perform similar functions independently in future. On that footing, the payment did not satisfy the treaty's make-available requirement. Since the assessee had no permanent establishment in India, the amount could not alternatively be taxed as business profits under the treaty.

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

Ratio Decidendi: Under the India-Singapore DTAA, technical or consultancy services are taxable as fees for technical services only when they make available technical knowledge, experience, skill, know-how or processes to the recipient; mere rendering of services, without such transmission, does not attract taxability.

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