Make available test under India-UK DTAA denied FTS treatment for IT support services, defeating disallowance.

Payment for IT support services to a UK group company was not fees for technical services under Article 13(4)(c) of the India-UK DTAA because the services did not make available technical knowledge, experience, skill, know-how or processes to the assessee. Mere use of sophisticated support, incidental benefit, or business convenience was insufficient, and the record showed no transfer of technology enabling the assessee to perform the same services independently. The payment was therefore not taxable as FTS, and disallowance under section 40(a)(i) was unsustainable.

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Issues: Whether the payment made to the UK group company for IT support services constituted fees for technical services under Article 13(4)(c) of the India-UK DTAA so as to attract disallowance under section 40(a)(i) of the Income-tax Act, 1961.

Analysis: The agreement showed that the services were rendered by the UK entity on a recurring basis for the group, while ownership of the intellectual property remained with the supplier. The decisive question was whether the services made available technical knowledge, experience, skill, know-how or processes to the assessee so that it could perform similar services independently in future. Mere use of sophisticated support services, incidental benefit, or business convenience was not enough. The record did not show any transfer of technology or any material by which the assessee acquired the ability to render the same services on its own without recourse to the service provider.

Conclusion: The payment did not fall within the make available limb of Article 13(4)(c) and was not taxable as fees for technical services; consequently, the disallowance under section 40(a)(i) was unsustainable.

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