Provision of blueprints i.e., technical designs and plans, without recourse and capable of being used in the future satisfies the test of ‘make available’ as stipulated under the India-US DTAA; taxable as fees for included services
Facts:
The Taxpayer, a US tax resident (US Co.), was a consulting firm engaged in providing services to the power industry. The US Co. provided services in the nature of operating power plants, decommissioning, consulting, project solutions and other engineering based services.
The US Co. entered into an agreement with an Indian Company (I Co.) for rendering consulting and engineering services in relation to ultra-mega power projects in India as per which, the US Co. was required to prepare necessary designs and documents.
The Tax Authority observed that the services were technical in nature and accordingly, taxable as fees for technical services (FTS) under the Act. Further, the services rendered by the US Co. satisfied the test of ‘make available’ under the India-US DTAA and, thus, were taxable as fees for included services (FIS).
Aggrieved, the Taxpayer appealed before the Tribunal on the issue whether the services rendered can be regarded as ‘making available’ technical knowledge, skill etc. under the India-US DTAA.
Held:
The expression ‘make available’, in the context of FIS, contemplates that the services are of such a nature that the payer of the services comes to possess the technical knowledge so provided, which enables the payer to utilise the same in the future.
Reliance was placed on the decision of the Karnataka High Court (HC) in De Beers India Minerals Pvt. Ltd [346 ITR 467] wherein the HC had observed that technical knowledge is ‘made available’ if the person acquiring such knowledge is possessed of the same and enabling the person to apply it in the future, on its own.
In the facts, the US Co. renders technical services in the form of technical plans, designs, projects etc. which are nothing but blueprints of the technical side of the projects. Such services were rendered at a pre-bid stage and is quite natural, that such technical plans etc. are meant for use in the future, if and when, I Co. takes up the bid for installation of the projects.
When the technical services provided by the US Co. are of such nature, which are capable of use in the future, the same satisfies the test of ‘make available’ as envisaged under the India-US DTAA. Accordingly, the services rendered by the US Co qualify as FIS and are, therefore, taxable in India.
