Make available test under India-Singapore DTAA: management fee held outside fee for technical services; section 234A relief granted.

Management fee paid to the Singapore entity was held not taxable as fee for technical services under Article 12(4)(b) of the India-Singapore DTAA because the services did not make available technical knowledge, skill, know-how or processes to the recipient; the addition was deleted. Interest under section 234A was also held not leviable because the return was filed within the extended due date. Interest under section 234B was sustained as mandatory on the facts found. The question of refund adjustment in computing demand was remitted to the Assessing Officer for factual verification and recomputation.

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Issues: (i) Whether management fee received from the Indian group entity was taxable as fee for technical services under Article 12(4)(b) of the India-Singapore DTAA; (ii) whether interest under section 234A of the Income-tax Act, 1961 was leviable for alleged delay in filing the return; (iii) whether interest under section 234B of the Income-tax Act, 1961 was leviable; (iv) whether the adjustment of refund while computing demand required verification.

Issue (i): Whether management fee received from the Indian group entity was taxable as fee for technical services under Article 12(4)(b) of the India-Singapore DTAA.

Analysis: The services under the management services agreement were characterised as strategic management, legal, engineering and technical advice, marketing, human capital, procurement and IT support, rendered on an ongoing basis through correspondence, email, telephone and occasional visits. The agreement and the sample communications did not show transfer of technical knowledge, experience, skill, know-how or processes to the recipient so as to enable independent application of the technology in future. The recurring nature of the arrangement indicated continued dependence on the service provider rather than any passing on of embedded technical capability. The make available requirement under Article 12(4)(b) was therefore not satisfied.

Conclusion: The management fee was not taxable as fee for technical services and the addition was deleted, in favour of the assessee.

Issue (ii): Whether interest under section 234A of the Income-tax Act, 1961 was leviable for alleged delay in filing the return.

Analysis: The return for assessment year 2021-22 was filed within the extended due date notified by Circular No. 1/2022 dated 11.01.2022. Since the return was within time as extended, there was no delay attracting section 234A.

Conclusion: Interest under section 234A was not leviable, in favour of the assessee.

Issue (iii): Whether interest under section 234B of the Income-tax Act, 1961 was leviable.

Analysis: Levy of interest under section 234B is mandatory and consequential once the statutory conditions are met. No basis was shown to disturb the levy on the facts found.

Conclusion: Interest under section 234B was sustained, against the assessee.

Issue (iv): Whether the adjustment of refund while computing demand required verification.

Analysis: The assessee disputed the existence of the refund amount adjusted in the computation sheet. The matter required factual verification by the Assessing Officer before recomputation of the demand payable.

Conclusion: The issue was restored for verification and recomputation, in favour of the assessee for statistical purposes.

Final Conclusion: The appeal succeeded on the core transfer-pricing characterisation of management fee and on the section 234A levy, while the section 234B levy was upheld and the refund-adjustment question was sent back for verification, resulting in partial relief overall.

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