Management support services not taxable as FTS where no make available condition was satisfied under the India-Singapore DTAA.

Management support services comprising operational, accounting, legal, procurement, IT and training support were held not to constitute fees for technical services under the India-Singapore DTAA or section 9(1)(vii) because they did not make available technical knowledge, skill, experience, know-how or processes for independent future use. The arrangement was also found separate from the brand licence, so the receipt was not ancillary and subsidiary to royalty under Article 12(4)(a). The earlier year's precedent was followed, and the tax addition was deleted.

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Issues: Whether consideration received for management support services was taxable as fees for technical services under Article 12(4)(b) of the India-Singapore DTAA and section 9(1)(vii) of the Income-tax Act, 1961, or as ancillary and subsidiary services under Article 12(4)(a), and whether the make available condition was satisfied.

Analysis: The services consisted of operational, accounting, legal, procurement, information technology and training support. The Tribunal followed the decision in the assessee's own earlier year and held that these services were managerial or consultancy services, but they did not make available technical knowledge, skill, experience, know-how or processes to the recipient so as to enable independent use in future. It further held that the management support agreement was separate from the brand licence arrangement, and the receipt could not be treated as ancillary and subsidiary to royalty under Article 12(4)(a). The earlier precedent also supported the view that the services formed part of a business arrangement and did not fall within the DTAA definition of fees for included services.

Conclusion: The receipt was not taxable as fees for technical services under Article 12(4)(a) or 12(4)(b) of the India-Singapore DTAA and section 9(1)(vii) of the Income-tax Act, 1961; the addition was deleted and the assessee succeeded.

Final Conclusion: The management support fee was held to be outside the FTS regime under the treaty and the Act, with the resultant tax addition set aside in both appeals.

Ratio Decidendi: Managerial or consultancy services are taxable as fees for technical services under the relevant treaty provision only when they either make available technical knowledge, skill, experience, know-how or processes, or are truly ancillary and subsidiary to royalty-producing rights or information.

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