The ITAT held that ‘Make available’ condition of India-UK DTAA has to be read into India-France DTAA. The ITAT held that advisory services for review of strategic and mergers and acquisitions options, do not qualify as FIS in absence of satisfaction of make available condition.
The Assessee, an Indian company made payment to a French Company (F Co) towards professional services rendered during the relevant year. The services were in the nature of advisory services for review of strategic and mergers and acquisitions options. The AO held that the services rendered by F Co qualified as FTS and since no TDS was deducted, disallowed the payments made to F Co. CIT(A) confirmed the additions.
The Assessee contended that services rendered by F Co were not in the nature of technical services and hence did not qualify as FTS. Alternatively, the Assessee contended that by virtue of the MFN clause in the India-France DTAA, the make available condition of India-UK DTAA had to be read into India-France DTAA. Since the services do not satisfy the test of ‘make available’, payment made to F Co did not qualify as Fee for included services (FIS). Further, in absence of a permanent establishment of F Co in India, such income was not liable to tax in India.
The ITAT held that by virtue of the MFN clause, make available condition had to be read into India-France DTAA. The ITAT observed that phrase “make available” means that the knowledge, experience, skill, knowhow, etc should be passed on to the service recipient such that the service recipient can carry out the services on its own. The ITAT held that the Assessee would have to go back to F Co if it wished to avail similar services from F Co in future and therefore ‘make available’ test was not satisfied. Thus, services rendered by F Co did not qualify as FIS and hence there was no requirement to withhold taxes on payments made to F Co in India.