Make available test under India-USA DTAA barred taxation of consultancy, reimbursement and support service receipts as FIS.

Receipts from business consultancy and reimbursement of expenses were not taxable as fee for included services under Article 12(4)(b) of the India-USA DTAA or section 9(1)(vii), because the record did not show that technical knowledge, experience, skill, know-how or processes were made available to the Indian entity for independent use. Receipts from support services were also not taxable under Article 12(4)(b), as the revenue failed to satisfy the make available condition despite the range of administrative, financial, personnel, marketing, computer and information support functions involved. The assessment additions on these receipts were deleted.

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Issues: (i) Whether receipts from business consultancy services and reimbursement of expenses were taxable as fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement and under section 9(1)(vii) of the Income-tax Act, 1961. (ii) Whether receipts from provision of support services were taxable as fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement.

Issue (i): Whether receipts from business consultancy services and reimbursement of expenses were taxable as fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement and under section 9(1)(vii) of the Income-tax Act, 1961.

Analysis: The receipts were held to be covered by the same factual matrix as in the assessee's earlier year, where identical consultancy and reimbursement receipts were found not to constitute fee for included services. The services were not shown to be technical services in the relevant sense, and the material did not establish that any technical knowledge, experience, skill, know-how or processes were made available to the Indian entity so that it could independently apply them. The reimbursement also did not acquire a taxable character merely by being routed through the service arrangement.

Conclusion: The receipts from business consultancy services and reimbursement of expenses were not taxable as fee for included services, and the addition was deleted in favour of the assessee.

Issue (ii): Whether receipts from provision of support services were taxable as fee for included services under Article 12(4)(b) of the India-USA Double Taxation Avoidance Agreement.

Analysis: The support services agreement showed a range of administrative, financial, personnel, professional, marketing, computer and information-related support functions. Even assuming that some activities could be characterised as technical or consultancy services, the decisive question was whether the service provider made available technical knowledge, skill, know-how or processes to the recipient. Continuous availing of the services since 2010 showed dependence on the service provider rather than transfer of a self-sustaining capability. The revenue failed to establish satisfaction of the make available condition, and the cited authority on different facts was found inapplicable.

Conclusion: The receipts from support services were not taxable as fee for included services, and the addition was directed to be deleted in favour of the assessee.

Final Conclusion: The disputed receipts were held not taxable as fee for included services, and the assessment additions on these issues could not survive.

Ratio Decidendi: Under Article 12(4)(b) of the India-USA DTAA, consultancy or technical receipts become taxable as fee for included services only if the services are technical or consultancy in nature and the provider makes available technical knowledge, experience, skill, know-how or processes to the recipient so that the recipient can apply them independently.

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