‘Most Favoured Nation’ clause can be referred to interpret treaties and not to import ‘make available’ clause

Facts:

a)The applicant entered into a Management Service Agreement with 'S' France for various management services.

b)It was submitted that the 'make available' clause was not satisfied in the case and, hence, the services would not fall under the technical services as per the India-France Treaty.

c)Applicant stated that, although there was no 'make available' clause in the India-France Treaty, yet, pursuant to protocol signed between India and France, the restricted scope of FTS in the India-UK DTAA would be applicable.

d)Therefore, in absence of such 'make available' of the technical knowledge, experience, skill, know-how or processes, the services rendered by S would not fall under the definition of technical services.

The Authority held in favour of Revenue as under:

1)A Protocol cannot be treated as the same with the provisions contained in the treaty itself, though it may be an integral part of the Treaty.

2)Protocol to the said DTAA puts restrictions on the rates and 'make available' clause cannot be read in the items.

3)The Notification ratifying the protocol did not include anything about the 'make available' provision. Had the intention of the Protocol or the Government been to include 'make available' clause in the Tax Treaty between India and France, it would have been done so in the said Notification.

4)Protocol or Memorandum of Association can be used for interpreting provision of the Treaty. It will not be correct/proper to import words, phrases or clause, that are not available into the Treaties between two Sovereign nations, on the basis of Treaties with another countries.

5)Therefore, the payments made by the applicant for the services rendered would come under the definition of fees for technical services both under the Act and the Treaty and would be liable to tax in India.- STERIA (INDIA) LTD., IN RE [2014] 45 taxmann.com 281 (AAR - New Delhi)