Treaty-based taxation of telecom service receipts: make available test and absence of permanent establishment kept them outside royalty and FTS.

The article explains that a challenge to reopening and limitation became infructuous after the Finance Act, 2026 amendment to section 153B, so no merits determination was made on that point. It also states that receipts from voice termination, bandwidth and O&M services were held not taxable in India as royalty or fees for technical services, because the Tribunal followed earlier coordinate bench rulings, treated Article 12 of the India-Singapore and India-USA DTAAs as pari materia, and applied the make available test. In the absence of a permanent establishment, the receipts were characterised as business profits, with substantive relief granted on taxability.

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Issues: (i) Whether the challenge to the reopening and the limitation of the assessment survived after the legislative amendment and (ii) whether the receipts for voice termination, bandwidth and O&M services were taxable in India as royalty, fees for technical services, or business profits.

Issue (i): Whether the challenge to the reopening and the limitation of the assessment survived after the legislative amendment

Analysis: The appeals raised a legal challenge to the validity of the assessment order on the ground of reopening and limitation. The Tribunal noted that the Finance Act, 2026 introduced an amendment in section 153B, and on that basis treated the issue as having become infructuous. No further adjudication on merits of the reopening or limitation challenge was undertaken.

Conclusion: The issue was dismissed as infructuous and the assessee did not succeed on this ground.

Issue (ii): Whether the receipts for voice termination, bandwidth and O&M services were taxable in India as royalty, fees for technical services, or business profits

Analysis: The Tribunal found the facts identical to those in earlier years and also accepted that Article 12 of the India-Singapore DTAA and Article 12 of the India-USA DTAA are pari materia. It applied the earlier coordinate bench view, including the relevance of the 'make available' condition, and held that the receipts from the relevant services did not merit taxation as royalty or fees for technical services in the manner adopted by the Assessing Officer. In consequence, the competing characterization as business profits in the absence of a permanent establishment prevailed.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The appeals were allowed only to the extent of the substantive taxability dispute, while the reopening and limitation challenge failed as infructuous, resulting in a partial relief to the assessee.

Ratio Decidendi: Where treaty provisions are materially pari materia and the relevant services do not satisfy the treaty threshold for technical services, the receipts cannot be taxed as royalty or fees for technical services in the absence of a permanent establishment.

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