Global Tax Alert | 30 July 2013

India's Mumbai ITAT rules that blueprints to be used in future satisfy "make available" test

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Executive summary

This tax Alert summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (ITAT) in the case of Sargent & Lundy LLC, USA (Taxpayer)1 on the issue of whether the 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 (the Treaty). 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 Treaty and, thus, taxable in India.


Under the Indian Tax Laws (ITL), fees for technical services (FTS) means any consideration for rendering managerial, technical or consultancy services. Under the Treaty, the FTS definition is restricted to those technical or consultancy services which, inter alia, 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 Taxpayer, a US tax resident, was a consulting firm engaged in providing services to the power industry. The Taxpayer provided services in the nature of operating power plants, decommissioning consulting, project solutions and other engineering based services.

The Taxpayer entered into an agreement with L&T Ltd. (L&T) for rendering consulting and engineering services in relation to ultra-mega power projects (Projects) in India. The Taxpayer was required to technically review and evaluate the Projects and prepare necessary designs and documents.

The Tax Authority observed that the services were technical in nature and accordingly, were taxable as FTS under the ITL. Further, the services rendered by the Taxpayer satisfied the test of ”make available” under the Treaty and, thus, was taxable as FIS.

The Taxpayer appealed before the ITAT.

ITAT's ruling

There are two aspects to the definition of FIS, viz. (a) there should be rendering of ”technical or consultancy services” and (b) such services should be ”made available” to the payer of such services. The relevant clauses of the agreement between the Taxpayer and L&T support that the consideration is for rendering ”technical or consultancy services.” The only issue which arises is whether such services can be regarded as ”making available” technical knowledge.

The expression ”make available,” in the context of FIS, contemplates that the services are of such a nature that the payer of the services comes to possess the technical knowledge so provided, which enables the payer, to utilize the same in future. Reliance was placed on the decision of the Karnataka High Court (HC) in De Beers India Minerals Pvt. Ltd.2 wherein the HC had observed that technical knowledge is ”made available” if the person acquiring such knowledge is possessed of the same, enabling the person to apply it in future, on its own.

The Taxpayer renders technical services in the shape of technical plans, designs, or projects which are nothing but blueprints of the technical side of the Projects. Such services were rendered at a pre-bid stage. It is thus, quite natural, that such technical plans are meant for use in future, if and when, L&T takes up the bid for installation of the Projects. When the technical services provided by the Taxpayer are of such nature, which are capable of use in future alone, the same will satisfy the test of ”make available” as envisaged under the Treaty. Accordingly, the services rendered by the Taxpayer qualify as FIS and are, therefore, taxable in India.


This ruling reiterates the principle that transfer of technology is a condition precedent to satisfy the ”make available” criteria. The phrase 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.


1. [ITA No. 8986/Mum/2010].

2. [346 ITR 467].

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (India), Mumbai
  • Sudhir Kapadia
    +91 22 6192 0900
  • Hitesh Sharma
    +91 22 6192 0620
Ernst & Young LLP (United Kingdom), Indian Tax Desk, London
  • Nachiket Deo
    +020 778 30862
Ernst & Young Solutions LLP, Indian Tax Desk, Singapore
  • Gagan Malik
    +65 6309 8524
Ernst & Young LLP, Indian Tax Desk, New York
  • Tejas Mody
    +1 212 773 4496

EYG no. CM3690