Payments to Singapore entity don't qualify as Fee for Technical Services under section 9(1)(vii) without "make available" condition

The ITAT Delhi held that payments received by the assessee from an Indian group entity did not qualify as Fee for Technical Services under section 9(1)(vii) of the Income-tax Act or Article 12(4) of the India-Singapore DTAA. The Tribunal found that the departmental authorities failed to establish through cogent evidence that the assessee made available technical knowledge, know-how, or skills to enable the Indian entity to use such knowledge independently. Following the precedent in Bombardier Transportation case, the Tribunal concluded that the "make available" condition was not satisfied, and therefore the additions made by the Assessing Officer were unsustainable and deleted.

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Issues:
The major issue involves the taxability of amounts received as Fee for Technical Services (FTS) by the assessee from an Indian group entity under the Income-tax Act and the India-Singapore Double Taxation Avoidance Agreement.

Issue 1 - Taxability of FTS under the Income-tax Act and DTAA:
The assessee, a non-resident corporate entity from Singapore, provided management support services to the Indian group entity. The Assessing Officer considered the services as managerial/technical/consultancy services, making technical knowledge available to the recipient. The assessee argued that the receipts did not qualify as FTS under the DTAA due to the non-fulfillment of the "make available" condition. The Tribunal found that the department failed to establish the transfer of technical knowledge, know-how, skill, etc., independently enabling the recipient to use them without the provider's assistance. Citing similar cases, the Tribunal concluded that the receipts were not FTS under the DTAA.

Issue 2 - Additional claim and levy of interest:
The assessee offered a portion of the receipts as FTS in the return of income but later claimed that it was not taxable under the tax treaty. The Assessing Officer rejected the claim as it was made through a revised return. The first appellate authority did not address the claim specifically. The Tribunal, lacking relevant facts, decided to restore this issue to the Assessing Officer for fresh adjudication after providing a reasonable opportunity for the assessee to be heard.

In conclusion, the Tribunal allowed one appeal and partly allowed two appeals, emphasizing that the receipts did not qualify as FTS under the tax treaty. The judgment was pronounced on 30th October, 2023.

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