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Issues: (i) Whether repair and maintenance services performed for aircraft equipment were taxable as fee for technical services under Article 12 of the India-USA DTAA on the basis that the services made available technical knowledge, know-how, skill, experience or processes to the recipient; (ii) Whether corporate allocation charges recovered on reimbursement basis were taxable as fee for technical services under Article 12 of the India-USA DTAA.
Issue (i): Whether repair and maintenance services performed for aircraft equipment were taxable as fee for technical services under Article 12 of the India-USA DTAA on the basis that the services made available technical knowledge, know-how, skill, experience or processes to the recipient.
Analysis: The services were rendered in the nature of repair and maintenance, but the recipient did not obtain the ability to perform similar repairs or maintenance independently in future. There was no transfer of technology, skill, knowledge, processes, or experience, and no effective imparting of capability to the Indian customer. The mere existence of specialized or technical services and the benefit obtained from them did not satisfy the treaty requirement that such services must make available technical knowledge, know-how, skill, experience or processes.
Conclusion: The repair and maintenance services were not taxable as fee for technical services under Article 12 of the India-USA DTAA and the issue is decided in favour of the assessee.
Issue (ii): Whether corporate allocation charges recovered on reimbursement basis were taxable as fee for technical services under Article 12 of the India-USA DTAA.
Analysis: The charges were recovered on the basis of actual expenditure and were in the nature of reimbursement without profit element. The record did not show that the assessee rendered technical, consultancy, or training services that enabled the recipient to independently perform such functions in future. The services were only customer-specific support, guidance, and information, and did not amount to making available any technical knowledge, skill, technology, or problem-solving capability.
Conclusion: The corporate allocation charges were not taxable as fee for technical services under Article 12 of the India-USA DTAA and the issue is decided in favour of the assessee.
Final Conclusion: The additions on both disputed service-receipt heads were deleted, and the assessee obtained full relief on the substantive transfer-pricing or treaty-taxability controversy raised in the appeal.
Ratio Decidendi: For Article 12 of the India-USA DTAA, services are taxable as fee for technical services only when they confer upon the recipient the ability to apply the technical knowledge, skill, experience, know-how or processes independently in future; mere rendering of specialized services or receipt of reimbursement does not satisfy the make available test.
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