Mumbai ITAT rules that blueprints, to be used in future, satisfy the test of ‘make available

 

This Tax Alert summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (ITAT) in the case of Sargent & Lundy LLC, USA (Taxpayer) on the issue of whether provision of blueprints i.e., technical designs and plans, satisfies the test of ‘make available’ and, accordingly, taxable as fees for included services (FIS) under the India–US Double Taxation Avoidance Agreement (US DTAA). The ITAT ruled that the services rendered by the Taxpayer was technical in nature, in the shape of technical plans, designs etc., which enabled the payer to use the same in future without recourse to the Taxpayer. As the payer is enabled to use the blueprints on its own without any recourse to the Taxpayer, the services satisfy the test of ‘make available’ as stipulated under the US DTAA and, thus, taxable in India.

The present ruling reiterates the principle that transfer of technology is a condition precedent to satisfy the ‘make available’ criteria. The phase ‘make available’ has been the subject matter of many rulings in India, wherein it has been held that the recipient should be in a position to derive an enduring benefit and is in a position to utilize the knowledge or know-how in future on its own. The ruling indicates that transfer of blueprints, i.e., technical plans, designs etc. which enables the payer to use the same without recourse to the provider of services, for executing projects in the future, satisfies the test of ‘make available’ and, accordingly, is taxable as FIS