Make Available Test under tax treaty upheld for management support and leadership training receipts

Management support fees were held not taxable as fees for technical services, following the assessee's earlier-year precedent and the applicable treaty position. For human resources services and leadership seminar or conference receipts, Article 12(4)(b) of the India-Portuguese treaty was applied on the basis that technical or consultancy services are taxable as fees for included services only if they make available technical knowledge, experience, skill, know-how or processes, or transfer a technical plan or design. The leadership training receipt was held not chargeable to tax, while the human resources and overlapping receipts required fresh factual examination and were remanded to the Assessing Officer.

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Issues: (i) Whether the amount received as management support fees was chargeable to tax as fees for technical services. (ii) Whether the receipts towards human resources services and leadership seminar and conference services were chargeable to tax as fees for included services under the India-Portuguese treaty by virtue of the Most Favoured Nation clause.

Issue (i): Whether the amount received as management support fees was chargeable to tax as fees for technical services.

Analysis: The assessee rendered managerial support services to its Indian entity and invoked the Most Favoured Nation clause in the protocol to the India-Sweden treaty. The issue had already been decided in the assessee's favour for the immediately preceding year on the same footing. Following that precedent, the amount was held not chargeable to tax as fees for technical services.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the receipts towards human resources services and leadership seminar and conference services were chargeable to tax as fees for included services under the India-Portuguese treaty by virtue of the Most Favoured Nation clause.

Analysis: Article 12(4)(b) of the India-Portuguese treaty applies only where the technical or consultancy services make available technical knowledge, experience, skill, know-how or processes, or involve development and transfer of a technical plan or design enabling the recipient to apply the technology. The leadership training receipt had already been treated as not chargeable to tax in earlier years, but the record for the year under appeal contained additional material on the nature of the human resources services and there was overlap between the receipts. The matter therefore required fresh factual examination by the Assessing Officer.

Conclusion: The issue was remanded to the Assessing Officer for fresh consideration, while the leadership training receipt was held not chargeable to tax.

Final Conclusion: The addition relating to management support fees was deleted, and the dispute concerning human resources and leadership-related receipts was sent back for re-examination in accordance with the treaty test.

Ratio Decidendi: Technical or consultancy services are taxable as fees for included services only when they satisfy the treaty's make available requirement.

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