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Issues: (i) Whether the IT Support and Maintenance charges fell within Article 12(4)(a) of the India-Singapore Double Taxation Avoidance Agreement as services ancillary and subsidiary to a royalty payment; (ii) Whether the IT Support and Maintenance charges fell within Article 12(4)(b) of the India-Singapore Double Taxation Avoidance Agreement as services making available technical knowledge, experience, skill, know-how or processes.
Issue (i): Whether the IT Support and Maintenance charges fell within Article 12(4)(a) of the India-Singapore Double Taxation Avoidance Agreement as services ancillary and subsidiary to a royalty payment.
Analysis: Article 12(4)(a) applies only where there is a payment falling within Article 12(3) as royalty, and the impugned services are ancillary and subsidiary to the application or enjoyment of that royalty-linked right or property. Since the software licence income itself was held not to constitute royalty in the facts of the case, the predicate for invoking Article 12(4)(a) was absent. The support services could not independently be brought within that clause once the royalty limb failed.
Conclusion: The IT Support and Maintenance charges did not fall within Article 12(4)(a) and were not taxable on that basis.
Issue (ii): Whether the IT Support and Maintenance charges fell within Article 12(4)(b) of the India-Singapore Double Taxation Avoidance Agreement as services making available technical knowledge, experience, skill, know-how or processes.
Analysis: The clause requires more than the mere rendition of technical services; the recipient must receive technical knowledge, experience, skill, know-how or processes in a manner enabling independent use in future without the service provider's further assistance. The support activities described in the record involved sizing review, configuration support, health checks, incident management, and related assistance, but they did not transfer any technical knowledge or skill to the customers for autonomous future application. The services were consumed in their provision and therefore did not satisfy the treaty's make-available requirement.
Conclusion: The IT Support and Maintenance charges did not fall within Article 12(4)(b) and were not taxable as fees for technical services.
Final Conclusion: The addition made on account of IT Support and Maintenance charges could not be sustained under the treaty, and the assessee succeeded in appeal.
Ratio Decidendi: Under Article 12 of the India-Singapore Double Taxation Avoidance Agreement, services are taxable as fees for technical services only if they fall within the specific treaty clause invoked, and the make-available test is satisfied only when the recipient acquires technical knowledge or skill for independent future use.
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