Make available test under India-USA DTAA excludes advisory, support and reimbursement receipts from fees for included services.

Consultancy and support receipts were not fees for included services under Article 12(4)(b) of the India-USA DTAA because the services were advisory or ongoing support in nature and did not make available technical knowledge, skill, experience or know-how to the Indian recipient; the additions were deleted. Cost-to-cost reimbursement of third-party expenses and miscellaneous outlays without markup likewise did not satisfy the treaty conditions for fees for included services, and the additions were deleted. Prior settlement under the Vivad Se Vishwas Scheme did not amount to tacit acceptance of the additions. Subscription fee receipts were not royalty because they represented access to copyrighted material rather than transfer of copyright, so they were not taxable in India.

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Issues: (i) whether consultancy services received from the Indian subsidiary constituted fees for included services under the India-USA DTAA, (ii) whether reimbursement of third-party costs and miscellaneous expenses constituted fees for included services, (iii) whether support services constituted fees for included services, (iv) whether prior settlement under the Vivad Se Vishwas Scheme amounted to tacit acceptance of the additions, and (v) whether subscription fee receipts were taxable as royalty under the DTAA and the Income-tax Act, 1961.

Issue (i): Whether consultancy services received from the Indian subsidiary constituted fees for included services under the India-USA DTAA.

Analysis: The services were examined in the light of Article 12(4)(b) of the India-USA DTAA and the settled requirement that consultancy or technical services must make available technical knowledge, experience, skill or know-how to the recipient. The services were found to be advisory in nature and similar to those considered in the assessee's earlier years, where the coordinate bench had held that such services did not amount to technical services and did not satisfy the make available condition.

Conclusion: The consultancy service receipts were not fees for included services and the addition was deleted in favour of the assessee.

Issue (ii): Whether reimbursement of third-party costs and miscellaneous expenses constituted fees for included services.

Analysis: The reimbursement receipts were treated by the lower authorities as having no independent existence, but the record showed that they were cost-to-cost reimbursements without markup. The earlier Tribunal rulings in identical facts were followed, including the position that such reimbursements, whether for third-party vendors or miscellaneous expenses, did not satisfy the conditions of Article 12(4)(b) and were not taxable as fees for included services.

Conclusion: The reimbursement receipts were not fees for included services and the addition was deleted in favour of the assessee.

Issue (iii): Whether support services constituted fees for included services under the India-USA DTAA.

Analysis: The support services were tested on the make available requirement under Article 12(4)(b). The services had been rendered on a continuing basis for several years, and the material did not show transfer of technical knowledge or skill enabling the Indian subsidiary to perform the services independently. Following the coordinate bench decision for the prior year, the Tribunal held that the services were not technical in the relevant treaty sense.

Conclusion: The support service receipts were not fees for included services and the addition was deleted in favour of the assessee.

Issue (iv): Whether prior settlement under the Vivad Se Vishwas Scheme amounted to tacit acceptance of the additions.

Analysis: Settlement under the Vivad Se Vishwas Scheme was held not to indicate an admission on merits or a tacit acceptance of the additions. The CBDT circular clarifying the scheme was relied upon, and the earlier tribunal view was followed.

Conclusion: The earlier settlement did not amount to tacit acceptance of the additions and this objection was rejected.

Issue (v): Whether subscription fee receipts were taxable as royalty under the DTAA and the Income-tax Act, 1961.

Analysis: Royalty under Article 12(3) of the India-USA DTAA and Section 9(1)(vi) of the Income-tax Act, 1961 was examined in the light of the requirement of transfer of a copyright or right to use a copyright. Grant of access to a platform or copyrighted material was distinguished from transfer of copyright, and the authorities in Engineering Analysis, Relx and Springer Nature were applied to hold that the receipt was only for use of a copyrighted article.

Conclusion: The subscription fee did not constitute royalty and was not taxable in India.

Final Conclusion: The appeals were substantially allowed on the core transfer-pricing and treaty-taxability issues, with the assessee succeeding on consultancy services, reimbursements, support services and subscription receipts, while the Vivad Se Vishwas objection was rejected.

Ratio Decidendi: Under the India-USA DTAA, consultancy or support receipts are taxable as fees for included services only if the services are technical or consultancy in nature and the provider makes available technical knowledge, skill, experience or know-how to the recipient; reimbursement of actual cost without markup and access to copyrighted material without transfer of copyright do not constitute taxable income of the relevant character.

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