Make available test limits treaty taxation of research and liaison receipts, while cost-to-cost reimbursements remain non-taxable.

Receipts from market research, strategic research, planning, data collection and client liaison were treated as advisory business-support services, but they did not qualify as fee for included services because they did not make available technical knowledge, experience, skill, knowhow or processes for independent use by the Indian affiliate. Reimbursement of client-related expenses on a cost-to-cost basis was likewise outside Article 12(4)(b), as third-party research costs without mark-up did not acquire taxable character merely because they were routed through the assessee. Both receipts therefore fell outside the treaty provision, and the tax additions were deleted.

---

---

Issues: (i) Whether receipts from market research, strategic research, planning, data collection and client liaison constituted fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement. (ii) Whether reimbursement of client-related expenses on a cost-to-cost basis constituted fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement.

Issue (i): Whether receipts from market research, strategic research, planning, data collection and client liaison constituted fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement.

Analysis: The services described in the agreement were advisory and business-support services such as market research, strategic research, planning, data collection and liaison with clients. These were not technical services in the sense of requiring expertise in technology. Even if some consultancy element existed, the decisive requirement under Article 12(4)(b) was that the services must make available technical knowledge, experience, skill, knowhow or processes so that the recipient could apply them independently. No material showed any such transfer or enabling of independent use by the Indian affiliate.

Conclusion: The receipts were not fee for included services under Article 12(4)(b), and the addition was unsustainable.

Issue (ii): Whether reimbursement of client-related expenses on a cost-to-cost basis constituted fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement.

Analysis: The reimbursement related to third-party costs incurred for market and industry research without any mark-up. An identical receipt had already been held not to be taxable as fee for included services in the payer's case. On that basis, the reimbursement did not acquire the character of taxable fee for included services merely because the expenses were routed through the assessee.

Conclusion: The reimbursement was not fee for included services under Article 12(4)(b), and the addition was deleted.

Final Conclusion: Both disputed receipts were held to fall outside Article 12(4)(b) of the treaty, so the assessee succeeded on the substantive taxability issues and the appeal stood allowed.

Ratio Decidendi: Consultancy receipts are taxable as fee for included services only when the services are technical or consultancy in nature and, in addition, make available technical knowledge, experience, skill, knowhow or processes to the recipient for independent use.

---