By Geeta Jani, Dhishat B. Mehta Chartered Accountants
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Article 13 India-UK DTAA – where the services provided by UK Company did not “make available” technical knowledge, skill etc., the payment was not taxable as FTS under Article 13 of India-UK DTAA.
Facts:
The taxpayer was an Indian company. The taxpayer had engaged a British company (“UKCo”) for conducting navigation studies to evaluate the economic feasibility of the port. For the services rendered, the taxpayer made payment to UKCo. According to the taxpayer, technical knowledge, skill or know-how was not “made available” by UKCo and hence, in terms of Article 13(4)(c) of India- UK DTAA , the payment was not FTS.1
Held:
• The agreement between taxpayer and UKCo stipulated that the report to be provided by UKCo was confidential, the taxpayer was not only prohibited from transferring the report to a third person but also prohibited from using the knowhow in performing services for any other client in future. The taxpayer was also prohibited from sub-licensing any of the rights granted.
• Based on the case law explaining the expression “make available,” the technology can be said to be “made available” only if the fruits of the services were transferred to the services recipient.
• Having regard to the facts and circumstances of the present case, the payment for the services provided was not made for “making available” technical knowledge, experience, knowhow to the taxpayer and therefore, it was not taxable as FTS under India-UK DTAA .
