Make available condition under treaty FTS rules failed for routine management support and related expense reimbursement.
Receipts for services to an Indian subsidiary were not taxable as fees for technical services under the treaty because the services were mainly routine management support and the Revenue did not show that technical knowledge, experience, skill, knowhow or processes were made available to enable independent use by the recipient. Applying the Most Favoured Nation clause to Article 13(4) of the India-UK DTAA through the India-France DTAA protocol, the tribunal held that the make available condition was not satisfied, so the service receipts were excluded. Reimbursement of expenses was also not separately taxable as fees for technical services on the same contractual and treaty footing, so no addition survived.
Issues: (i) Whether the receipts from services rendered to the Indian subsidiary constituted fees for technical services under the applicable treaty provisions. (ii) Whether reimbursement of expenses was taxable as fees for technical services.
Issue (i): Whether the receipts from services rendered to the Indian subsidiary constituted fees for technical services under the applicable treaty provisions.
Analysis: The applicable scope of fees for technical services was taken from Article 13(4) of the India-UK DTAA by applying the Most Favoured Nation clause in the India-France DTAA protocol. The services were found to be largely routine management support services, and the Revenue did not establish that the entire bundle of services was technical or consultancy in nature. Even where some services could arguably fall within that description, the Revenue failed to prove that technical knowledge, experience, skill, knowhow or processes were made available to the recipient so as to enable independent future use without the provider's assistance.
Conclusion: The receipts did not constitute fees for technical services and the addition was deleted in favour of the assessee.
Issue (ii): Whether reimbursement of expenses was taxable as fees for technical services.
Analysis: The reimbursement was considered in the same contractual and treaty setting as the service receipts, and no separate basis was established to treat it differently as taxable fees for technical services.
Conclusion: The reimbursement of expenses was not taxable as fees for technical services and no addition survived, in favour of the assessee.
Final Conclusion: The treaty-based characterisation of the impugned receipts failed, the additions were deleted, and the appeal succeeded entirely.
Ratio Decidendi: Under a treaty containing a make available condition, receipts are taxable as fees for technical services only if the services are technical or consultancy in nature and the service provider makes available technical knowledge, experience, skill, knowhow or processes enabling independent use by the recipient.