Make available condition in DTAA kept offshore repair charges outside fees for technical services, so withholding failed.

Repair and overhaul charges paid to non-resident vendors for helicopter parts were treated as not constituting fees for technical services where the relevant DTAAs contained a make available condition. Because the services were performed abroad without transferring technical knowledge, skill, or know-how to the assessee, the receipts were not chargeable to tax in India. The treaty provisions prevailed over the domestic charging provisions under section 90(2), so section 195 withholding was not attracted. On that basis, disallowance under section 40(a)(i) was unsustainable.

---

---

Issues: Whether repair and maintenance overhauling charges paid to non-resident entities for helicopter parts constituted fees for technical services so as to attract tax deduction obligations and disallowance under section 40(a)(i) of the Income-tax Act, 1961.

Analysis: The payments related to repair and overhaul of helicopter parts sent outside India to non-resident vendors. The Tribunal followed its own earlier decision in the assessee's case and held that, for treaty jurisdictions containing a make available condition, repair services performed abroad did not result in making available technical knowledge, skill, or know-how to the assessee. In the absence of such make available element, the receipts did not qualify as fees for technical services under the relevant DTAAs. By virtue of section 90(2) of the Income-tax Act, 1961, the more beneficial treaty provisions prevailed over the domestic charging provisions. Since the payments were not chargeable to tax in India, section 195 was not attracted.

Conclusion: The disallowance under section 40(a)(i) was unsustainable and the issue was decided in favour of the assessee.

---