IT support services do not satisfy make available test under India-UK DTAA – ITAT

IT support services do not satisfy make available test under India-UK DTAA

ABCAUS Case Law Citation
ABCAUS 3627 (2022) (12) ITAT

Important Case Laws relied upon:
CIT Vs.  Guy Carpenter & Co. Ltd 254 CTR 243

H.J. Heinz Company
De Beers India Minerals [P] Limited 346 ITR 467
Mitsubishi Electric India Ltd ITA No. 3336/DEL/2018

In the instant case, the assessee had challenged the order passed by the National Faceless Appeal Centre. The grievance of the assessee was that the CIT(A) erred in considering the payment made by the assessee to its Foreign group company as Fees for Technical Services [FTS] by holding that services “make available”, technology, knowledge, skill, know-how or processes to the assessee as per Article 13 of India-UK DTAA.

The Return of the assessee was selected for complete scrutiny under CASS. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has paid amount to its foreign holding company but not deducted tax at source (TDS) claiming that Information Support System Services availed by the assessee company do not fall under the definition of FTS under Article 13 of the DTAA.

The Assessing Officer was of the opinion that it is not necessary that the phrase “make available” be expressly mentioned in the description of the services availed. The Assessing Officer observed that the assessee was engaged in the business of providing emergency card services. On loss of financial card and offers a range of services to block the card and help the customer in difficult time.

The AO held that the assessee company was liable to withhold tax and failing to do so attracted the provisions of section 40(a)(i) of the Income Tax Act, 1961 (the Act).


After considering the terms of the agreement of the assessee and in the light of Article 13(4) of the DTAA, the ITAT opined that unless the recipient of the services is enabled to provide same services without recourse to the service provider, the services cannot be said to have made available recipient of services.

The Tribunal opined that mere incidental advantage to the recipient of services is not enough. The real test is the 

Transfer of technology and on the given facts of the case, there was no transfer of technology and what has been appreciated by the Revenue was the incidental benefit to the assessee which had been considered to be of enduring advantage.

The Tribunal observed that in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider.

The Tribunal observed that in the instant act the intellectual property was with the supplier [Foreign based company] and there was no transfer of skill or technical services.  The recipient assessee had not been enriched by receiving the services and making it capable to face similar challenges in future on its own and acquiring skills to deal with the issues. Rendition of these services by the foreign company did not enable the recipient to provide similar services without recourse to the service provider in future.  Merely incidental benefit or enrichment is not sufficient.

The Tribunal opined that the agreement between group services and the assessee was perpetual and such services  were provided by the group company on recurring basis to the assessee and if the technical knowledge, skill etc. is being made available to the assessee, then there would be no need for the assessee to take recourse to the group company for these services.

The Tribunal held that IT support services do not satisfy the make available test as no technical know-how, skill etc were transferred to the assessee.

Accordingly, in light of judicial decisions relied upon by the assessee, the ITAT directed the Assessing Officer to delete the disallowance.

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