Make available test bars tax on routine support reimbursements where no technical knowledge is transferred to the recipient.

Cost-to-cost reimbursement for routine IT and support services was not taxable as fee for included services under Article 12 of the India-USA DTAA because the services did not satisfy the make available test. The Tribunal found that application, infrastructure, security and training support were provided under an inter-company arrangement, but the record did not show transmission of technical knowledge, skill, know-how or processes enabling the Indian affiliates to independently perform the services after the arrangement ended. It also noted the absence of any profit element and that the Revenue did not rebut the assessee's allocation methodology or contractual recharge basis. The addition was deleted.

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Issues: (i) Whether reimbursement of cost for IT and support services, recovered on a cost-to-cost basis without markup, was taxable as fee for included services under Article 12 of the India-USA Double Tax Avoidance Agreement.

Analysis: The services were rendered under a continuing inter-company arrangement and were found to be routine IT support, including application, infrastructure, security and training support. The decisive test was whether the services made available technical knowledge, experience, skill, know-how or processes so that the recipient could independently apply the technology after the service arrangement ended. The Tribunal applied the make available requirement and held that the material on record did not show any transmission of specialized knowledge or ability enabling the Indian affiliates to perform the services on their own. It further noted that the reimbursements were made strictly on a cost-to-cost basis, with no profit element, and that the Revenue had not rebutted the assessee's allocation methodology or the contractual basis of recharge.

Conclusion: The addition treating the reimbursement as fee for included services was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: A cost-to-cost reimbursement for routine support services is not taxable as fee for included services unless the service provider makes available technical knowledge or skill enabling the recipient to independently apply the technology.

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