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Issues: (i) whether receipts for IT support services were taxable as fee for technical services under Article 13 of the India-UK DTAA applying the make available test; and (ii) whether receipts for non-IT support services were taxable as fee for technical services under Article 13 of the India-UK DTAA applying the make available test.
Issue (i): whether receipts for IT support services were taxable as fee for technical services under Article 13 of the India-UK DTAA applying the make available test.
Analysis: The receipts related to recurring IT support functions provided from the UK for the group, and the earlier coordinate bench decisions involving the same group had already examined substantially similar services under the same agreement. The decisive consideration was whether the services enabled the Indian recipient to independently apply technical knowledge, skill or know-how after the service was rendered. The record did not show transfer of technical knowledge or any material to establish that the recipient had been enabled to perform those services on its own. The distinction drawn by the tax authority between IT support services and the later IT development project was not sufficient to establish satisfaction of the make available condition.
Conclusion: The receipts for IT support services were not taxable as fee for technical services and the addition was deleted.
Issue (ii): whether receipts for non-IT support services were taxable as fee for technical services under Article 13 of the India-UK DTAA applying the make available test.
Analysis: The non-IT services comprised routine group-level support in areas such as human resources, finance, legal, compliance and secretarial matters. The material relied upon did not establish that any technical knowledge, experience, skill, know-how or process was actually transferred so as to enable the recipient to use it independently. The finding recorded in the dispute resolution proceedings that there was no apparent transfer of such knowledge or capability remained unshaken, and the reassessment order did not bring reliable evidence to the contrary.
Conclusion: The receipts for non-IT support services were not taxable as fee for technical services and the addition was deleted.
Final Conclusion: The assessee succeeded on the substantive transfer-pricing related taxability issues, while the remaining grounds were not adjudicated as academic, resulting in a partial allowance of the appeal.
Ratio Decidendi: For Article 13 of the India-UK DTAA, services are taxable as fee for technical services only where they make available technical knowledge, experience, skill, know-how or processes to the recipient so that the recipient can apply them independently; mere rendering of support or consultancy services is insufficient.
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