FTS can be ‘made available’ only if the technology is transferred – Ahd ITAT

ITO v VEEDA CLINICAL RESEARCH PVT LTD ITA No.1406/Ahd/2009 (dated 28 June 2009) – Ahmedabad ITAT


During the year, the assessee made payments of GBP 35,600 to Veeda Clinical Research Ltd UK, for providing in-house training of its employees, and of GBP 8,500, made to Steve Matheson UK, for providing market awareness and development training to its employees. The payment was made without deducting tax at source under section 195 of the Act. The Assessing Officer disallowed the same under section 40(a)(i) of the Act. The CIT(A) also upheld the order of the AO.

Assessee’s contentions:

  • In terms of the provisions of Article 13(4)(c) of India-UK DTAA, fees for technical services can be brought to tax in the source country only when such services “make available” technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design”.
  • The training services did not “make available” any technical knowledge, experience, skill, know how or process, or consist of the development and transfer of a technical plan or design.

Tax Authority’s arguments:

  • The expression ‘make available’ also include the cases in which technical services were offered or made accessible to the recipient of services and not necessarily confined to the cases in which the recipient should be “trained or made expert in such technical knowledge etc”.
  • Reference is made to the examples set out in MOU in the India-US DTAA wherein ‘technical training’ is said to be specifically included.


  • The law is by now settled so far as the connotations of ‘make available’ clause in the definition of fees for technical services in the contemporary tax treaties are concerned.
  • It is held to be a condition precedent for invoking this clause that the services should enable the person acquiring the services to apply technology contained therein.
  • Hon’ble Delhi High Court in the case of DIT Vs Guy Carpenter & Co Ltd (346 ITR 504) and Hon’ble Karnataka High Court in the case of CIT Vs De Beers India Pvt Ltd (346 ITR 467) support this proposition
  • Unless there is a transfer of technology involved in technical services extended by the UK based company, the ‘make available’ clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under Article 13(4)(c) of India UK tax treaty.
  • What is really the decisive factor is not the fact of training services per se but the training services being of such a nature that it results in transfer of technology.
  • In the present case, the training services rendered by the service provider are general in nature as the training is described as ‘in house training of IT staff and medical staff’ and of ‘market awareness and development training’. This training does not involve any transfer of technology.

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