Make available condition under India-USA DTAA denied FTS taxation where no technical knowledge was transferred independently.

TDS credit was to be allowed after verification under the matching provisions, as the mismatch was not sustained on merits. The service receipts were examined under the India-USA DTAA and were treated as fees for technical services under domestic law, but treaty protection depended on the make available condition. Because the services did not transfer technical knowledge, skill, know-how, or processes enabling the recipient to act independently, the receipts were not taxable in India under the treaty and the addition was deleted. Consequential relief followed on the tax credit issue.

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Issues: (i) Whether the assessee was entitled to credit of tax deducted at source for the full amount claimed. (ii) Whether the service receipts from the Indian affiliate were taxable in India as fees for technical services under the India-USA DTAA, and whether the make available condition was satisfied.

Issue (i): Whether the assessee was entitled to credit of tax deducted at source for the full amount claimed.

Analysis: The credit mismatch was examined on the basis of the return and the supporting record. The adjustment was not sustained on merits, and the Assessing Officer was directed to grant credit after verification in accordance with law, including the relevant TDS matching provisions.

Conclusion: In favour of the assessee.

Issue (ii): Whether the service receipts from the Indian affiliate were taxable in India as fees for technical services under the India-USA DTAA, and whether the make available condition was satisfied.

Analysis: The services were treated as falling within the domestic concept of fees for technical services, but treaty protection under Article 12 of the India-USA DTAA required satisfaction of the make available condition. On the facts, the services did not transfer technical knowledge, skill, know-how, or processes so as to enable the recipient to perform independently without further assistance. The record did not establish that the recipient had absorbed the provider's expertise in a manner amounting to make available.

Conclusion: The receipts were not chargeable to tax in India under the India-USA DTAA, and the addition was deleted.

Final Conclusion: The appeal succeeded on the substantive taxability issue, with consequential relief also granted on TDS credit.

Ratio Decidendi: For treaty purposes, fees for technical services are taxable only when the services result in the transfer of technical knowledge, experience, skill, know-how, or processes so that the recipient can apply them independently without continued recourse to the service provider.

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