Treaty make-available test limits fees for technical services, while software access payments are not royalty absent copyright rights.

Under the India-UK treaty, managerial and support services are taxable as fees for technical services only if they satisfy the make available test, meaning the recipient must acquire technical knowledge, skill, know-how or processes for independent use. Applying that standard, receipts from General Business Support Services, SUN and GSAP maintenance charges, GST scoping charges, and IT service/local project cost allocations were treated as non-taxable fees for technical services. Receipts for access and cost allocation of SUN and GSAP software applications were also held not to be royalty, because use of software as a copyrighted product is distinct from use of copyright itself.

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Issues: (i) Whether receipts from General Business Support Services constituted fees for technical services. (ii) Whether receipts towards access and cost allocation for SUN and GSAP software applications constituted royalty. (iii) Whether receipts towards SUN and GSAP maintenance charges constituted fees for technical services. (iv) Whether GST scoping charges constituted fees for technical services. (v) Whether IT service and local project cost allocations constituted fees for technical services.

Issue (i): Whether receipts from General Business Support Services constituted fees for technical services.

Analysis: The arrangement was examined in the light of the India-UK treaty definition of fees for technical services, which requires technical or consultancy services to satisfy the make available condition. The services under the cost contribution arrangement were managerial in nature and did not transmit technical knowledge, skill, know-how or processes so as to leave the recipient able to apply the technology independently. The earlier ruling relied upon by the Revenue had already been quashed, and the binding effect of that later decision governed the present year as well.

Conclusion: The receipts from General Business Support Services do not constitute fees for technical services and the addition was deleted in favour of the assessee.

Issue (ii): Whether receipts towards access and cost allocation for SUN and GSAP software applications constituted royalty.

Analysis: The treaty definition of royalty was applied as controlling over the wider domestic law definition. Payments made for access to copyrighted software, on a cost-to-cost basis, do not amount to consideration for the right to use copyright itself. The decision follows the principle that use of software as a copyrighted product is distinct from use of copyright, and the cost allocation did not create any taxable royalty income.

Conclusion: The receipts towards access and cost allocation for SUN and GSAP software applications do not constitute royalty and the addition was deleted in favour of the assessee.

Issue (iii): Whether receipts towards SUN and GSAP maintenance charges constituted fees for technical services.

Analysis: The maintenance receipts were tested under Article 13 of the treaty both as ancillary and subsidiary services and under the make available limb. Since the underlying software access receipts were not royalty, the ancillary and subsidiary limb could not apply. The maintenance activity also did not result in the transfer of technical knowledge or skill to the recipient so as to satisfy the make available test. The receipts were also treated as akin to BSS and therefore failed on the same reasoning.

Conclusion: The receipts towards SUN and GSAP maintenance charges do not constitute fees for technical services and the addition was deleted in favour of the assessee.

Issue (iv): Whether GST scoping charges constituted fees for technical services.

Analysis: The GST-related expenditure was incurred for customisation of existing systems to meet regulatory requirements, and the recovered amounts were found to be comparable to the BSS and software-related receipts already held not taxable. The services did not make available technical knowledge, experience, skill, know-how or processes, and the treaty provisions dealing with fees for technical services were therefore not attracted.

Conclusion: The GST scoping charges do not constitute fees for technical services and the addition was deleted in favour of the assessee.

Issue (v): Whether IT service and local project cost allocations constituted fees for technical services.

Analysis: The lower authorities had treated these recoveries as part of BSS or alternatively as technical services, but the same make available analysis applied. The relevant activities did not transfer technical knowledge or enable independent use by the recipient, and the receipts were therefore outside the treaty definition of fees for technical services.

Conclusion: The IT service and local project cost allocations do not constitute fees for technical services and the addition was deleted in favour of the assessee.

Final Conclusion: The appeal was allowed to the extent that the principal additions treating the impugned receipts as taxable royalty or fees for technical services were set aside, while the remaining grounds were either consequential, academic, or not pressed.

Ratio Decidendi: Under the India-UK treaty, managerial or support services are taxable as fees for technical services only if they satisfy the make available test, and payments for use of software as a copyrighted product do not constitute royalty unless they convey rights in the copyright itself.

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