UK treaty FTS relief made 'un'available by Delhi HC
MNCs deputing expatriate employees on secondment to Indian affiliates would be concerned with Delhi HC's latest judgment. Delhi HC in Centrica ruling (reported first on Taxsutra on April 29), affirmed AAR's view that employee deputation created PE in India. While the focus of the ruling is on PE status, Delhi HC has given a few important (and rather interesting) observations on the interpretation of "make available clause" under India-UK treaty's Fees for Included Services (FIS) clause.
HC first of all has ruled that employee deputation is a 'technical' service under the treaty definition. While examining make available relief , HC has drawn a distinction between "make available" clause in India - UK treaty as against India-Canada treaty.
Describing it as a nuanced inquiry, HC holds that under Article 12 of India-Canada treaty, consideration for rendering of any technical or consultancy services taxable (as FIS), if such services make available technical knowledge etc.
On the other hand, Delhi HC has noted that in Article 13 of India-UK treaty, the word "or" separates two parts "consideration for rendering of any technical or consultancy services" and "make available condition". The India-UK DTAA states FIS means "payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which … or make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design".
HC concludes that "make available" requirement in UK treaty is disjunctive from the rest of the provision, unlike in the India-Canada DTAA !
This view (with utmost respect), unsettled my understanding of "make available" clause. Surely, there will be another interesting debate unfolding on international tax for next coming years.