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2023 (3) TMI 255 - AT - Income TaxIncome deemed to accrue or arise in India - Fee for Technical Services (FTS)/Fee for Included Services (FIS) u/s 9(1)(vii) and Article 12(4)(b) of India – USA Double Taxation Avoidance Agreement (DTAA) - amount received by the assessee towards provision of Marketing Support Services (MSS) - assessee before us is a wholly owned subsidiary of an Indian entity - HELD THAT:- The scope of services also provide for expert advice on developing market strategy and marketing campaign, attending meetings, conference etc. for the promotion of parent company’s products, providing relevant reliable and current information with regard to the products of parent company with regard to USA market and gathering data for enhancing the marketability of parent company products. They are not of the nature to term them as either technical or consultancy services. Even assuming that some amount of consultancy is involved, however, the question which begs an answer is whether, make available condition of Article 12(4)(b) is satisfied. Article 12(4)(b) provides that a consideration received from provision of technical or consultancy services can be treated as FIS only when it makes available technical knowledge, experience, skill, know-how or processes to the service recipient. The term ‘make available’ has been interpreted in various judicial precedents to mean that there must be a transfer of technical knowledge, experience, skill, know-how etc. from the service provider to service recipient in a manner so as to enable the service recipient to perform such services in future independently without any aid and assistance of the service provider. Nothing has been brought on record by the departmental authorities to demonstrate that there is complete transfer of technical knowledge, know-how, skill etc. to the recipient of service so as to enable him to use such technical know-how, knowledge, experience, skill etc. independently without the aid and assistance of the service provider. The reasoning based on which, the departmental authorities have proceeded to treat the consideration received as FIS is, provision of such services has resulted in enduring benefit to the parent company. The aforesaid interpretation of the departmental authorities is an antithesis to the interpretation given to the term ‘make available’ by various judicial authorities. The decisions relied upon by learned counsel appearing for the assessee clearly support this view. We hold that the services provided by the assessee under the marketing support service agreement are neither in the nature of technical or consultancy services under Article 12(4) of India – USA Tax Treaty. Even, assuming that it is in the nature of consultancy services, however, the ‘make available’ condition provided under Article 12(4)(b) of the Tax Treaty is not satisfied. That being the case, the consideration received cannot be treated as FIS under Article 12(4)(b) of the Tax Treaty. Accordingly, we delete the addition made by the Assessing Officer. Appeal of assessee allowed.
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