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Issues: (i) Whether consultancy and training receipts were taxable as fees for included services under Article 12 of the India-USA DTAA by satisfying the make available condition; (ii) Whether reimbursement or general management charge receipts were taxable as fees for included services or constituted mere reimbursement.
Issue (i): Whether consultancy and training receipts were taxable as fees for included services under Article 12 of the India-USA DTAA by satisfying the make available condition.
Analysis: The applicable treaty test required the services to be technical or consultancy in nature and to make available technical knowledge, experience, skill, know-how, or processes so that the recipient could apply them independently in future. Mere rendering of specialised consultancy or training services, even if requiring technical input from the service provider, was not enough unless the recipient acquired and could independently use the underlying knowledge or skill. On the facts, the services were recurring, customised advisory and training functions relating to organisation strategy, talent, rewards, and leadership, but the recipients were not enabled to perform those functions on their own without further recourse to the assessee.
Conclusion: The consultancy and training receipts were not taxable as fees for included services and the issue was decided in favour of the assessee.
Issue (ii): Whether reimbursement or general management charge receipts were taxable as fees for included services or constituted mere reimbursement.
Analysis: The receipts represented amounts recovered from group entities for third-party software subscription and related procurement costs incurred by the assessee. The character of the receipts remained reimbursement where the assessee paid the vendors and recovered the corresponding cost from the affiliates, and no technical knowledge or know-how was made available to the recipients. The existence of a mark-up was not established on the facts in a manner sufficient to change the essential nature of the receipt into taxable technical service consideration.
Conclusion: The reimbursement or general management charge receipts were not taxable as fees for included services and the issue was decided in favour of the assessee.
Final Conclusion: The tax addition was deleted on both substantive grounds, and the assessee succeeded in the appeal.
Ratio Decidendi: For Article 12 of the India-USA DTAA, consultancy or technical services become taxable as fees for included services only when the recipient is enabled to apply the technical knowledge or skill independently in future; mere specialised assistance or advisory support does not satisfy the make available test.
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