Make available test under India-USA DTAA governs taxability of administrative service payments and eliminates withholding duty.

Payments to a foreign associated enterprise for administrative services were not taxable as fees for technical services or fees for included services under the India-USA DTAA because the services did not make available technical knowledge, experience, skill, know-how or processes, nor involve transfer of a technical plan or design. Mere managerial or administrative support was insufficient, and the treaty definition governed over domestic law characterization under section 9(1)(vii). As a result, no tax was deductible at source on the payments, and the associated withholding demand and addition were deleted.

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Issues: Whether payments made to the foreign associated enterprise for administrative services were taxable as fees for technical services or fees for included services under the India-USA DTAA, and whether the assessee was liable to deduct tax at source under the Income-tax Act, 1961.

Analysis: The payment could be taxed as fees for included services only if the services rendered satisfied the treaty test of "make available" technical knowledge, experience, skill, know-how or processes, or consisted of development and transfer of a technical plan or design. Mere rendering of managerial or administrative services was insufficient. The record did not show that the foreign enterprise had made available any technical knowledge or skill to the assessee. The domestic law characterization under section 9(1)(vii) could not prevail where the treaty applied, and the treaty provisions governed the taxability of the payment.

Conclusion: The payments were not taxable as fees for technical services or fees for included services, and the assessee had no obligation to deduct tax at source on those payments.

Final Conclusion: The addition and consequent withholding tax demand were deleted, and the assessee's appeal succeeded.

Ratio Decidendi: Under the India-USA DTAA, technical or consultancy services are taxable only when they make available technical knowledge, experience, skill, know-how or processes to the recipient; absent that element, the payment is outside the treaty definition of fees for included services.

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