Make available test under the India-UK treaty barred taxation of consulting and management service receipts in India.

Receipts from consulting engineering services, management fees and common cost recharge were held not taxable in India as fees for technical services under the India-UK tax treaty or the Income-tax Act because the services did not make available technical knowledge, experience, skill, know-how or processes to the Indian recipient. The management fee and recharge were treated as ancillary to the same service arrangement and could not be taxed differently. In the absence of a permanent establishment in India, the receipts were characterised as business profits under Article 7 and not taxable in India; the additions were deleted in favour of the assessee.

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Issues: Whether receipts from consulting engineering services and management fees/common cost recharge were taxable in India as fees for technical services under the India-UK tax treaty and the Income-tax Act, and whether, in the absence of a permanent establishment, such receipts could be taxed in India as business income.

Analysis: The Tribunal followed its earlier orders in the assessee's own case and held that the services rendered did not result in making available technical knowledge, experience, skill, know-how, or processes to the Indian recipient. The receipts from consulting engineering services were therefore not covered by the treaty definition of fees for technical services. The Tribunal further held that the management fees and common cost recharge were ancillary to the same service arrangement and could not be taxed on a different footing. In the absence of a permanent establishment in India, the receipts were held to be business profits under Article 7 and not taxable in India.

Conclusion: The receipts were not taxable as fees for technical services or royalty, and the additions were deleted in favour of the assessee.

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