Treaty relief for certification charges upheld where no technical knowledge was made available to the payer.

Remittance for diamond testing and certification charges was analysed under the India-USA tax treaty and was held not taxable in India as fees for technical services or fees for included services. The recipient was treated as a USA resident on the basis of the tax residency certificate, Form 10F, PE certificate and bank confirmation, and the reference to a Hong Kong laboratory was accepted as a clerical error. The certification work only produced a report and did not make available technical knowledge, experience, skill, know-how or process for independent future use, so the treaty's make-available requirement was not satisfied.

---

---

Issues: Whether the remittance for diamond testing and certification charges was taxable as fees for technical services or fees for included services in India, and whether the assessee was entitled to the benefit of the India-USA tax treaty on the basis that the recipient was a resident of the USA and the services did not make available technical knowledge or skill.

Analysis: The remittance was made pursuant to an agreement with the USA entity, the invoices were raised by that entity, and the assessee produced the tax residency certificate, Form 10F, PE certificate and bank confirmation showing that the amount was credited to the USA entity's account. The apparent reference to the Hong Kong laboratory in the remittance forms was treated as a clerical error. On the merits, the certification activity produced a report but did not impart technical knowledge, experience, skill, know-how or process to the assessee so as to enable independent use in future. The service therefore did not satisfy the make available requirement under Article 12 of the treaty.

Conclusion: The remittance was not taxable as fees for technical services or fees for included services in India, and treaty benefit was available to the assessee. The Revenue's challenge failed.

Ratio Decidendi: Where the recipient is a treaty resident and the service merely results in a report without transferring technical knowledge, experience, skill, know-how or process for independent future use, the payment does not constitute fees for included services under the make available test.

---