Make available test under India-USA DTAA: liaison and coordination receipts escape FIS, but sponsorship research income is taxable.

Receipts under the Industrial Liaison Program and Co-ordination Membership Agreement were not taxable as Fees for Included Services under Article 12 of the India-USA DTAA because the activities were limited to relationship-building, administrative coordination, and access facilitation without making available technical knowledge, skill, know-how, or a technical plan or design. By contrast, Sponsorship Assignment receipts were taxable because the assessee undertook specific research and delivered reports and related rights that made available technical know-how and an enduring technology benefit to the sponsor. TDS credit was directed to be verified and allowed in accordance with law.

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Issues: (i) Whether receipts from the Industrial Liaison Program and Co-ordination Membership Agreement were taxable in India as Fees for Included Services under Article 12 of the India-USA DTAA; (ii) Whether receipts from Sponsorship Assignment were taxable in India as Fees for Included Services under Article 12 of the India-USA DTAA; (iii) Whether credit of tax deducted at source was to be granted.

Issue (i): Whether receipts from the Industrial Liaison Program and Co-ordination Membership Agreement were taxable in India as Fees for Included Services under Article 12 of the India-USA DTAA.

Analysis: The Industrial Liaison Program consisted of relationship-building activities, introductions to faculty and research projects, and dissemination of factual information, without rendering technical services or making available technical knowledge, skill, know-how, or a technical plan. The Co-ordination Membership Agreement involved the assessee acting only as a host and coordinator for consortium members, providing administrative support and access to consortium research without undertaking research or transferring a technical design or process. On the settled make available test under Article 12, these receipts did not fall within Fees for Included Services.

Conclusion: The receipts from the Industrial Liaison Program and Co-ordination Membership Agreement were not taxable in India and the additions were deleted in favour of the assessee.

Issue (ii): Whether receipts from Sponsorship Assignment were taxable in India as Fees for Included Services under Article 12 of the India-USA DTAA.

Analysis: Under the sponsorship arrangements, the assessee undertook specific research for corporate sponsors and provided research reports and related intellectual property rights or joint rights, enabling the sponsor to apply the underlying technology and derive enduring benefit. This amounted to making available technical knowledge, experience, skill, know-how, or a technical plan or design within Article 12.

Conclusion: The receipts from Sponsorship Assignment were taxable in India as Fees for Included Services and the addition was sustained against the assessee.

Issue (iii): Whether credit of tax deducted at source was to be granted.

Analysis: The Assessing Officer was directed to verify the records and allow the credit in accordance with law.

Conclusion: The claim for TDS credit was allowed for statistical purposes in favour of the assessee.

Final Conclusion: The appeal succeeded partly, with relief granted on the Industrial Liaison Program, Co-ordination Membership Agreement, and TDS credit, while the addition on Sponsorship Assignment was upheld.

Ratio Decidendi: For Article 12 of the India-USA DTAA, a payment is taxable as Fees for Included Services only if the technical or consultancy service makes available technical knowledge, experience, skill, know-how, processes, or a technical plan or design to the recipient.

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