Make-available test under the India-US DTAA excludes software licensing and integration services lacking independent technical transfer.

Under Article 12(4)(b) of the India-US DTAA, software licensing receipts were treated as taxable as fees for included services only if the arrangement made available technical knowledge, experience, skill, know-how or processes to the recipient. Mere use of software that produced commercial output, without transfer of source code, technical design, or independently usable technology, did not satisfy the make-available requirement. Installation and integration services were characterised as support or ancillary services linked to the software licence and, without an independent transfer of technical knowledge, also fell outside fees for included services. The commentary states that both receipts were therefore not taxable under Article 12(4)(b).

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Issues: (i) Whether software licensing receipts were taxable as fees for included services under Article 12(4)(b) of the India-US DTAA. (ii) Whether installation and integration related professional services were taxable as fees for included services under Article 12(4)(b) of the India-US DTAA.

Issue (i): Whether software licensing receipts were taxable as fees for included services under Article 12(4)(b) of the India-US DTAA.

Analysis: The decisive test was whether the services made available technical knowledge, experience, skill, know-how or processes to the customer. The receipts from software licensing were found to yield only commercial information and output from use of the software, without transfer of source code, technical design, or any technology enabling the customer to apply the technology independently in future. Mere use of a product embodying technology was held insufficient to satisfy the make-available requirement.

Conclusion: The software licensing receipts were not taxable as fees for included services and the issue was decided in favour of the assessee.

Issue (ii): Whether installation and integration related professional services were taxable as fees for included services under Article 12(4)(b) of the India-US DTAA.

Analysis: The professional services were limited to installation of the software into the customer system and integration of customer content with the application services. These were treated as support or ancillary services. Since the primary software licensing activity itself was not taxable as fees for included services, the connected installation and integration services, being merely supportive in nature, could not independently be characterised as taxable fees for included services.

Conclusion: The installation and integration services were not taxable as fees for included services and the issue was decided in favour of the assessee.

Final Conclusion: The additions based on characterisation of both software licensing receipts and associated installation and integration services as taxable fees for included services were rejected, and the assessee obtained complete relief in the appeal.

Ratio Decidendi: For Article 12(4)(b) of the India-US DTAA, services are taxable only when technical knowledge, skill or know-how is made available so that the recipient can apply it independently; commercial output or support services without such transfer do not satisfy the make-available test.

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