Fees for Technical Services under India UK DTAA found not to arise where continuous support services do not 'make available' technical skill; reimbursements non taxable.

Services described were support services rendered continuously and did not 'make available' technical knowledge or skill to the recipient; therefore such receipts do not qualify as Fees for Technical Services under the India UK DTAA, and the appellate finding excluding FTS taxation is affirmed. Amounts received as reimbursements were shown to be cost to cost pass throughs with no income element and thus are not taxable as income; accordingly the addition made by the assessing officer was deleted. The same reasoning was applied mutatis mutandis to the subsequent assessment year, and the revenue grounds were dismissed.

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Issues: (i) Whether the services rendered by the assessee to its Indian associated enterprise constitute Fees for Technical Services (FTS) within the meaning of Article 13 of the India UK DTAA; (ii) Whether amounts received as reimbursements constitute taxable income in India.

Analysis: Article 13(4) of the India UK DTAA requires that, for payments to qualify as FTS, the services must make available technical knowledge, experience, skill, know how or processes enabling the recipient to use them independently in future. Section 90(2) of the Income tax Act, 1961 governs application of DTAA provisions. The Tribunal examined the service agreements and the nature of services actually rendered (ongoing IT support, network and data centre operations, user administration and related support) and found these to be continuous support services rather than transfers or imparting of specialized technical knowledge enabling independent use by the recipient. The CIT(A) compared old and new agreements and gave an independent finding that the services do not "make available" technical knowledge or skill. On reimbursements, the Tribunal examined the receipts and the facts showing cost to cost recharge without any income element and noted that the Assessing Officer made no specific contrary finding.

Conclusion: The services rendered by the assessee do not make available technical knowledge, skill or know how and therefore do not qualify as Fees for Technical Services under Article 13 of the India UK DTAA; amounts received as genuine cost to cost reimbursements do not constitute taxable income in India. The appeals filed by the Revenue are dismissed and the assessee's cross objections are rendered infructuous and dismissed.

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