Fees for included services under the India-USA DTAA require technical or consultancy services and a satisfied make available test.

Receipts are taxable as fees for included services under Article 12 of the India-USA DTAA only if they are technical or consultancy services that satisfy the ancillary and subsidiary test or the make available test. Support services were treated as managerial day-to-day business support, not technical or consultancy services, and were not shown to be inseparable from the trademark licence arrangement; the addition was deleted. Reimbursement of training expenses was likewise not taxable, because the onboarding and orientation support did not transfer technical knowledge, skill, know-how, processes, or a technical plan or design, and did not satisfy the make available test; that addition was also deleted.

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Issues: (i) Whether receipts for support services were taxable as fees for included services under Article 12 of the India-USA DTAA; (ii) Whether reimbursement of training expenses was taxable as fees for included services under Article 12(4)(b) of the India-USA DTAA.

Issue (i): Whether receipts for support services were taxable as fees for included services under Article 12 of the India-USA DTAA.

Analysis: The support services were found to be in the nature of managerial services rendered for day-to-day business support and not technical or consultancy services. Article 12(4)(a) applies only where technical or consultancy services are ancillary and subsidiary to the use or enjoyment of the royalty-bearing right, property or information. The arrangement for licensing the trademark and the separate service agreement did not establish that the support services were customarily provided in such royalty arrangements, were inseparable from the royalty contract, or satisfied the relevant factors under the treaty memorandum.

Conclusion: The addition on account of support services was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether reimbursement of training expenses was taxable as fees for included services under Article 12(4)(b) of the India-USA DTAA.

Analysis: The training receipts represented reimbursement of actual expenses incurred for onboarding and orientation of new recruits of the Indian affiliate. The training did not transfer technical knowledge, experience, skill, know-how or processes, nor did it develop or transfer any technical plan or design. Mere familiarisation with work profiles, policies and business model did not satisfy the make available test under Article 12(4)(b).

Conclusion: The addition on account of training expense reimbursement was deleted and the issue was decided in favour of the assessee.

Final Conclusion: Both additions were held unsustainable under the treaty and the appeals succeeded in full.

Ratio Decidendi: Under Article 12 of the India-USA DTAA, receipts are taxable as fees for included services only when they are technical or consultancy services that satisfy either the ancillary and subsidiary test or the make available test; reimbursement of actual onboarding or orientation costs without transfer of technical knowledge is not taxable as such.

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