The ‘Make Available’ Principle in DTAA: Tax Implications and Analysis of the Indo-Singapore Agreement

An In-depth Analysis of the Delhi High Court’s Interpretation of Fees for Technical Services (FTS) and its Broader Impact on International Tax Law

Introduction

The taxation of cross-border service income has emerged as one of the most contentious issues in international tax jurisprudence. Within this broader debate, the interpretation of Fees for Technical Services under Double Taxation Avoidance Agreements has become particularly significant. The ‘make available’ clause represents a critical threshold test that determines whether payments made for technical services can be taxed in the source country. This principle, embedded within several of India’s tax treaties including the Indo-Singapore DTAA, has been the subject of extensive judicial scrutiny and has shaped the tax landscape for multinational service providers operating in India.

The fundamental question that courts have grappled with is straightforward yet profound: when does the provision of technical services cross the threshold from mere service delivery to actual technology transfer? This distinction carries substantial tax implications, as the answer determines whether the service provider’s income becomes taxable in India or remains taxable only in the country of residence. The Delhi High Court’s ruling in Commissioner of Income Tax v Bio-Rad Laboratories (Singapore) Pte Ltd represents a landmark interpretation of this principle, providing clarity on what constitutes technical services under the India-Singapore DTAA [1].

Legal Framework: Domestic Law and Treaty Provisions

Section 9(1)(vii) of the Income Tax Act, 1961

The Indian domestic law governing fees for technical services is embodied in Section 9(1)(vii) of the Income Tax Act, 1961. This provision deems income by way of fees for technical services to accrue or arise in India when such fees are payable by the Government, a resident person, or a non-resident in specific circumstances. The Explanation 2 to Section 9(1)(vii) defines fees for technical services as “any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel)” [2].

The domestic law definition is deliberately broad and encompasses managerial, technical, and consultancy services. However, it specifically excludes consideration for construction, assembly, mining, or similar projects, as well as amounts chargeable as salary income. The wide amplitude of this definition under domestic law stands in stark contrast to the more restrictive definitions found in many of India’s tax treaties, creating a hierarchy where treaty provisions often override domestic law pursuant to Section 90(2) of the Income Tax Act.

Article 12 of the India-Singapore DTAA

The India-Singapore DTAA, originally signed in 1994 and subsequently amended through protocols, contains specific provisions governing the taxation of royalties and fees for technical services under Article 12. The critical aspect of this treaty provision is the ‘make available’ clause embedded within Article 12(4)(b), which narrows the scope of taxable technical services considerably compared to the domestic law definition [3].

Article 12(4) of the India-Singapore DTAA defines fees for technical services as “payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel)” provided such services make available technical knowledge, experience, skill, know-how, or processes to the person acquiring the services, or consist of the development and transfer of a technical plan or technical design. The protocol amendment of 2005 established that the tax rate on such fees, when taxable in India, shall not exceed 10 percent of the gross amount [4].

This ‘make available’ requirement creates a two-pronged test: first, whether the services involve technical knowledge, experience, or skill; and second, whether such technical elements are actually made available to the service recipient in a manner that enables independent future application. The burden of demonstrating that technical knowledge has been transferred rests on the tax authorities, and mere provision of services utilizing technical expertise does not automatically satisfy this test.

The ‘Make Available’ Principle: Judicial Interpretation

The De Beers Precedent

The foundational case establishing the interpretation of the ‘make available’ principle is the Karnataka High Court’s decision in CIT v De Beers India Minerals Pvt Ltd. In this case, the assessee had engaged a Netherlands-based company to conduct airborne geophysical surveys for diamond prospecting. The tax authorities contended that payments for these services constituted fees for technical services under Article 12(5) of the India-Netherlands DTAA, which contains a ‘make available’ clause similar to the India-Singapore treaty [5].

The Karnataka High Court held that for technical knowledge to be ‘made available,’ the mere provision of services is insufficient. The court emphasized that the recipient must be enabled to apply the technology independently in the future without continued assistance from the service provider. The court observed that while the Dutch company had performed surveys using substantial technical skills and expertise, it had not made available the technical knowledge regarding data collection or processing to the assessee. The assessee could not independently undertake such surveys in the future without engaging similar technical experts again, which demonstrated that no technology transfer had occurred [6].

This decision established that the ‘make available’ test requires more than temporary access to technical expertise during service delivery. It requires an enduring transfer of capability that allows the service recipient to replicate the technical work independently. The distinction is between ‘use of’ technical knowledge by the service provider and ‘transfer of’ technical knowledge to the service recipient.

Bio-Rad Laboratories Case: Application to Management Services

The Delhi High Court’s decision in Commissioner of Income Tax v Bio-Rad Laboratories (Singapore) Pte Ltd involved a Singapore entity providing IT and administrative support services to its Indian affiliate. The Assessing Officer had characterized these services as ‘management support services’ and sought to tax them at 10 percent under the India-Singapore DTAA. The services included professional advice through studies, evaluations, report reviews, liaison work, advice on policy issues, business operations, HR management, and financial management [7].

The Income Tax Appellate Tribunal ruled in favor of the taxpayer, concluding that the services did not satisfy the ‘make available’ criterion under Article 12(4)(b) of the India-Singapore DTAA. The tribunal reasoned that if technical knowledge, experience, and skills had genuinely been made available to the Indian affiliate, the service agreement would not have continued from January 1, 2010, through multiple years. The continuous nature of the service arrangement itself evidenced that no independent capability had been transferred to the Indian entity [8].

The Delhi High Court upheld this reasoning, observing that the provision of advisory services, even when involving technical or managerial expertise, does not automatically constitute fees for technical services under the treaty. The court emphasized that the critical inquiry is whether the Indian entity acquired the ability to independently perform similar functions in the future. Since the Indian affiliate remained dependent on continued service provision from the Singapore entity, no technology transfer had occurred within the meaning of the treaty provision.

Regulatory Framework and Tax Treatment

Tax Deduction at Source Requirements

Under Section 195 of the Income Tax Act, 1961, any person responsible for paying to a non-resident any sum chargeable to tax must deduct income tax at the applicable rates. When payments qualify as fees for technical services under domestic law or treaty provisions, the payer bears the responsibility for deducting tax at source. Failure to deduct or deposit such tax exposes the payer to liability under Section 201 for tax default and interest charges under Section 201(1A) [9].

However, when treaty provisions apply and establish that payments do not constitute fees for technical services, the obligation to deduct tax at source may not arise at all. This creates significant compliance considerations for Indian entities making payments to non-residents, as incorrect characterization can lead to substantial tax liabilities, penalties, and interest costs. The determination of whether the ‘make available’ test is satisfied thus carries direct consequences for withholding tax obligations.

Rate of Taxation and Treaty Benefits

When fees for technical services are determined to be taxable under the India-Singapore DTAA, Article 12(2) limits the tax rate to 10 percent of the gross amount, provided the recipient is the beneficial owner of the fees. This represents a preferential rate compared to the domestic law rate, which could potentially be higher. The protocol amending the India-Singapore DTAA, which came into force on August 1, 2005, specifically modified Article 12 to establish this maximum rate [4].

To claim treaty benefits, the non-resident service provider must obtain and furnish a Tax Residency Certificate from the government of Singapore along with Form 10F, which provides prescribed details about the taxpayer. These documentary requirements serve as gatekeeping mechanisms to prevent treaty shopping and ensure that only genuine residents of treaty partner countries can access preferential treaty rates.

Comparative Analysis: Other Tax Treaties with ‘Make Available’ Clauses

The ‘make available’ clause is not unique to the India-Singapore DTAA. India has incorporated similar provisions in tax treaties with several countries including the United States, United Kingdom, Canada, Australia, Netherlands, and others. The interpretation of this clause has developed through a body of jurisprudence examining payments under different treaty frameworks, creating a relatively consistent judicial approach across treaties.

The Memorandum of Understanding to the India-US DTAA provides helpful guidance on the ‘make available’ concept, stating that technology will generally be considered made available when the person acquiring the service is enabled to apply the technology. The MoU clarifies that the fact that provision of the service may require technical input by the service provider does not per se mean that technical knowledge has been made available to the service purchaser [5].

This guidance has been applied by Indian tribunals and courts in interpreting similar clauses in other tax treaties, creating a degree of harmonization in the application of the principle across India’s treaty network. The underlying policy rationale is consistent: to distinguish between pure service transactions and genuine technology transfer arrangements that justify source country taxation rights.

Contemporary Relevance and Recent Developments

Recent tribunal decisions continue to refine the application of the ‘make available’ principle to contemporary business arrangements. The Delhi ITAT’s ruling in Criteo Singapore examined digital services including data center services, advertisement space services, and business support services. The tribunal held that these services did not make available any technical knowledge to the Indian entity and therefore were not taxable as fees for technical services under the India-Singapore DTAA [2].

Similarly, the Mumbai ITAT’s recent decision in CA(Singapore) PTE Ltd v ACIT clarified that ancillary software support services, even when billed separately from software licenses, do not constitute fees for technical services when the ‘make available’ requirement is not satisfied. The tribunal deleted a tax addition of Rs. 48.27 crore, emphasizing that support services that merely assist in software usage without transferring underlying technical knowledge fall outside the scope of taxable technical services [9].

These decisions reflect the evolving nature of service delivery in the digital economy and the courts’ consistent adherence to substance over form in applying the ‘make available’ test. The principle continues to provide taxpayer-friendly outcomes in cases involving routine business support, management consulting, and technical assistance that does not involve genuine knowledge transfer.

Conclusion

The ‘make available’ principle represents a critical limitation on source country taxation rights for technical services under India’s tax treaty network. The judicial interpretation developed through cases like De Beers and Bio-Rad Laboratories establishes that mere provision of services utilizing technical expertise does not constitute taxable fees for technical services when no enduring transfer of technical capability occurs. This principle protects multinational service providers from taxation on routine support services while preserving India’s right to tax genuine technology transfer arrangements.

For multinational enterprises operating in India, understanding the ‘make available’ test is essential for tax planning and compliance. Service arrangements should be structured and documented with careful attention to whether technical knowledge is being transferred or merely applied. The continuous dependence on the service provider, the nature of deliverables, and the recipient’s ability to independently replicate the services all serve as factual indicators that courts examine in applying this principle.

As cross-border service delivery continues to evolve, particularly in digital and technology sectors, the ‘make available’ principle will remain a cornerstone of international tax jurisprudence, balancing the legitimate taxation interests of source countries against the need to avoid double taxation of routine commercial services.

References

[1] LiveLaw. (2023, October 29). IT And Admin Services By Singapore Entity To Its Affiliate In India Can’t Be FTS: Delhi High Court. Retrieved from https://www.livelaw.in/high-court/delhi-high-court/it-and-admin-services-by-singapore-entity-to-its-affiliate-in-india-cant-be-fts-delhi-high-court-240864 

[2] Meta Legal. (2025, April 29). Delhi ITAT on Digital Services Tax Under India-Singapore DTAA. Retrieved from https://www.metalegal.in/post/delhi-itat-clarifies-on-taxability-of-digital-services-under-india-singapore-dtaa 

[3] Income Tax India. (n.d.). Singapore Comprehensive Agreements – India-Singapore DTAA. Retrieved from https://incometaxindia.gov.in/DTAA/108690000000000077.htm 

[4] Inland Revenue Authority of Singapore. (2011). Protocol Amending Singapore-India DTA (Ratified). Retrieved from https://www.iras.gov.sg/media/docs/default-source/dtas/protocol-amending-singapore-india-dta-(ratified)(mli)(1-oct-2019).pdf?sfvrsn=dd28a790_0 

[5] Indian Kanoon. (2007, February 2). Income Tax Officer vs De Beers India Minerals Pvt. Ltd. Retrieved from https://indiankanoon.org/doc/575153/ 

[6] The Laws. (2012, March 15). Commissioner of Income Tax vs. De Beers India Minerals (P.) Ltd. Retrieved from https://www.the-laws.com/Encyclopedia/browse/Case?caseId=012102074100 

[7] SCC Online. (2023, November 2). IT and Administrative Services provided by Singapore Entity to its Indian affiliate cannot be construed as FTS: Delhi HC. Retrieved from https://www.scconline.com/blog/post/2023/11/01/delhi-hc-it-and-administrative-services-provided-by-singapore-entity-to-its-indian-affiliate-cannot-be-construed-as-fts-legal-news/ 

[8] TaxGuru. (2023, November 17). IT & Admin Services to Indian Affiliate by Singapore Entity Not FTS: Delhi HC. Retrieved from https://taxguru.in/income-tax/it-admin-services-indian-affiliate-singapore-entity-fts-delhi-hc.html 

[9] Taxscan. (2024, December 25). Ancillary Software Support Not a Fee for Technical Services: ITAT Drops ₹48.27 Cr Income Tax Addition Under India-Singapore DTAA. Retrieved from https://www.taxscan.in/top-stories/ancillary-software-support-not-a-fee-for-technical-services-itat-drops-4827-cr-income-tax-addition-under-india-singapore-dtaa-1440778 

Published and Authorized by Vishal Davda