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of <h1>Taxability of management support services under India-UK DTAA clarified: reimbursements and support fees not taxable as FTS.</h1> Analysis addresses whether consideration for management support services and expense reimbursements provided by a non-resident UK resident to an Indian ... Taxability as Fee for Technical Services (FTS) - taxability of management support services fee - Article 13 of India-United Kingdom Double Tax Avoidance Agreement (DTAA) - make available clause - taxability of reimbursement of expenses as FTS under Article 13 of India-UK DTAA - assessee is a non-resident corporate entity incorporated in United Kingdom (UK) and a tax resident of UK. HELD THAT:- As decided in own case [2024 (8) TMI 1670 - ITAT DELHI] AO has failed to demonstrate with cogent evidence, the consequential enduring benefits obtained by the Indian AE i.e., PBIL forming the basis of the conclusion that the services satisfy the make-available clause in terms of the India-UK DTAA. As evident from the aforementioned judicial decisions, the requirement of technology being made-available thereby enabling the Indian AE to apply the same on its own, has not been fulfilled in the instant case, hence the allegation of the AO is without any merit and is liable to be rejected. Thus, hold that consideration received for services in the nature of marketing and communications, human resource, commercial, corporate affairs and legal, finance, information technology, facilities management/ corporate development, rendered to PBIL would not be taxable as FTS in terms of the provisions of the India-UK DTAA. There cannot be any dispute that the factual position supra - We hold that the income/receipts from management support services and reimbursement of expenses cannot be treated as FTS under India-UK DTAA. These grounds are allowed. Issues: (i) Whether receipts from management support services and reimbursement of expenses are taxable as Fee for Technical Services (FTS) under Article 13 of the India-UK DTAA; (ii) Whether short credit of tax deducted at source (TDS) claimed by the assessee should be granted.Issue (i): Whether receipts characterized as management support services fee and reimbursement of expenses qualify as FTS under Article 13 of the India-UK DTAA.Analysis: The question involves whether services rendered amount to making available technology, technical knowledge, skill or processes to the recipient so as to satisfy the make-available criterion for FTS. The Tribunal examined the nature of services (routine management, HR, marketing, operations, IT support, corporate services) and the absence of evidence demonstrating transfer of technology, know-how or enduring capability enabling independent performance by the Indian recipient. The Tribunal relied upon coordinate bench decisions applying the make-available test and the principle that incidental or transient advantages do not satisfy the requirement.Conclusion: Receipts from management support services and reimbursement of expenses are not taxable as FTS under Article 13 of the India-UK DTAA; conclusion in favour of the assessee.Issue (ii): Whether the assessee is entitled to credit for short TDS.Analysis: The statutory entitlement to TDS credit requires factual verification of tax deducted and claimed credits. The Tribunal directed factual grant of credit in accordance with law without making a substantive tax computation in the order.Conclusion: Direction to grant TDS credit in accordance with law; conclusion in favour of the assessee.Final Conclusion: The decision results in the tax treatment of the challenged receipts being established as not constituting FTS under the India-UK DTAA and in directions for the assessing authority to grant applicable TDS credit and revise demand after factual verification.Ratio Decidendi: Routine management and support services that do not transfer technology, know-how, skill or processes and do not provide an enduring capability to the recipient do not satisfy the make-available requirement and therefore do not qualify as Fee for Technical Services under Article 13 of the India-UK DTAA.
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