Swedish-company could claim Fee for Technical Services ('FTS') received from its Indian subsidiaries as tax-exempt if 'make available' condition was not satisfied, as India-Sweden DTAA contained Most Favoured Nation clause ('MFN' clause) as per which make available clause in India-Portugese could be imported into the India-Sweden DTAA.
The issue that arose for consideration of the ITAT was:
Whether the assessee, a Swedish-company could be given benefit of India-Portuguese DTAA on principle of MFN clause?
The ITAT held in favour of assessee as under:
1) An MFN clause can direct more favourable treatment available in other treaties only in regard to the same subject matter, same category of matter or same clause of the matter.
2) The MFN clause in the protocol attached to the treaty takes care of a situation wherein either of the contracting states enter into a DTAA with another sovereign state and where the same subject matter has been given more favourable treatment by way of a definition or mode of tax.
3) The parties can claim the benefit on the recognized principle of MFN clause. On the basis of protocol to India-Sweden DTAA, a Swedish-company could claim the benefit of 'make available' condition in India-Portugal treaty to claim tax-free status for FTS received from its Indian Subsidiaries.- Sandvik AB v. Dy. DIT (International Taxation) (2014) 52 taxmann.com 211 (Pune - Trib.)