The assessee provided consulting services on actual cost based charges and information technology services to the Indian subsidiary. The assessee submitted that payments would not constitute ‘fees for technical services’ as the services would not “make available” the recipient to perform the services in the future, as provided under the  “Most Favoured Nation” clause (MFN clause) in India -Sweden Tax treaty, read with India Portugal DTAA. The AO denied the benefits of the MFN Clause under India – Sweden tax treaty was not notification.

The Tribunal held that the MFN clause in the Indo-Swedish tax treaty is a situation in which limiting the source taxation, for fees for technical services, to any other OECD member jurisdiction, by itself, is enough to trigger that the same provisions. No further actions on India’s part are envisaged in the Indo-Swedish tax treaty to trigger the application of the same provisions in the Indo Portugal tax treaty (no requirement to issue separate notifications). Portugal is an OECD jurisdiction, and India has entered the tax treaty after Sweden. The Portuguese tax treaty provides a far more restricted scope of ‘fees for technical services’, since it adopts the ‘make available’ clause, which restricts the taxation of fees for technical services only in such cases which “make available” technical knowledge, experience, skill, know-how or processes. The services provided does not enable the recipient of these services to perform the same services, in the future, without recourse to the assessee, thus cannot be considered as FTS. (ITA No 7315 of 2018, dt 08.01.2021)(AY 2015-16)