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The issue of interpretation of agreements for avoidance for double taxation [AADT / DTAA / tax treaty] has always been ongoing. More particularly when it involves importing the meaning of any expressions from the interpretation adopted for any other tax treaty.

India has signed tax treaties with various countries out of which certain DTAA’s (viz., India-Australia, India-Portuguese Republic, India-USA etc.) contains ‘Make Available’ clause which contains a restrictive definition of Fees for technical services / Fees for included services as against the wider definition of ‘Fees for Technical Services’ as provided under section 9(1)(vii) of the Income-tax Act [“the Act”] and certain DTAA’s (like India-France, India-Switzerland etc.) contains ‘Most Favoured Nation’ clause which requires a country to provide any concessions, privileges, or immunities granted to one nation of a particular body (say, OECD) to all other nations of that particular body (say, OECD).

‘Make Available’ clause usually present in the Article 12 of the tax treaty (i.e., Royalties and/or Fees for technical services / Fees for included services) which are read as under:

“Fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services :

  • are ancillary and subsidiary to the application or enjoyment of the right, property or information or;
  • make available technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design.”[1]

The definition of the words ‘Make available’ given in Oxford Dictionary is to mean that something should be within one’s reach so that one can use it. Broadly, ‘Make Available’ means, by providing services (fees for technical services / fees for included services in the instant case), the provider of the services has equipped the recipient of the services in such a manner that the recipient of the services is enabled to do such services independently / apply such knowledge independently.

 To understand the concept of ‘Make Available’, let us take an example from the memorandum of India – US tax treaty which is as under:


A U.S. manufacturer has experience in the use of a process for manufacturing wallboard for interior walls of houses which is more durable than the standard products of its type. An Indian builder wishes to produce this product for its own use. It rents a plant and contracts with the U.S. company to send experts to India to show engineers in the Indian company how to produce the extra-strong wallboard. The U.S. contractors work with the technicians in the Indian firm for a few months. Are the payments to the U.S. firm considered to be payments for “included services”?


The payments would be fees for included services. The services are of a technical or consultancy nature; in the example, they have elements of both types of services. The services make available to the Indian company technical knowledge, skill and processes.”

On the other hand, ‘Most favoured nation’ clause generally occupies its position in the protocol to tax treaty. It is relevant to note that the protocol of the tax treaty is a part of tax treaty unless otherwise provided in the tax treaty. The extract of the protocol to India- Switzerland tax treaty containing the ‘Most Favoured Nation’ is provided as under:

 “In respect of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties and fees for technical services), if under any Convention, Agreement or Protocol between India and a third State which is a member of the OECD signed after the signature of this Amending Protocol, India limits its taxation at source on dividends, interest, royalties or fees for technical services to a rate lower than the rate provided for in this Agreement on the said items of income, the same rate as provided for in that Convention, Agreement or Protocol on the said items of income shall also apply between both Contracting States under this Agreement as from the date on which such Convention, Agreement or Protocol enters into force.

If after the date of signature this Amending Protocol, India under any Convention, Agreement or Protocol with a third State which is a member of the OECD, restricts the scope in respect of royalties or fees for technical services than the scope for these items of income provided for in Article 12 of this Agreement, then Switzerland and India shall enter into negotiations without undue delay in order to provide the same treatment to Switzerland as that provided to the third State.”[2]

The ‘Most Favoured Nation’ clause is a provision in a tax treaty under which one country agrees to accord to the other contracting state a treatment that is no less favourable than that which it accords to other or third states. Thus, the MFN clause promotes non-discrimination among countries and also tends to promote the objective of free trade in general.

However, certain factors[3] would be relevant to determine the application of ‘Most Favoured Nation’ clause:

  • Date of applicability of ‘Most Favoured Nation’ clause;
  • Categories of states (i.e., whether the benefits of ‘Most Favoured Nation’ clause to be applied in case where the beneficial tax treaty is entered with the OECD member nations or with any nations irrespective of its membership with OECD or not);
  • Nature of Income (i.e., Dividend, Royalties, Fees for technical services etc.);
  • Benefits provided (i.e., benefits provided w.r.t. tax rate or scope).

As far as the meaning of the ‘Make Available’ clause and ‘Most Favoured Nation’ clause is concerned, the same has been explained in detail above. An interesting issue that arises out of the above discussion is ‘Interplay of Make Available clause with Most Favoured Nation clause’. The issue is whether a treaty of a particular country (say, India – USA treaty) can be imported in a treaty with another country (say, India – France treaty) by virtue of ‘Most Favoured Nation’ clause.

In this connection, reference is invited to the judgement of the Hon’ble Delhi High Court in the case of Steria (India) Ltd. v. Commissioner of Income-tax-VI [2016] 72 1 wherein it was held as under: “The words ‘a rate lower or a scope more restricted’ occurring in clause 7 of the Protocol envisages that there could be a benefit on either score i.e. a lower rate or more restricted scope. One does not exclude the other. The other expression used is ‘if under any Convention, Agreement or Protocol signed after 1-9-1989 between India and a third State which is a member of the OECD’. This also indicates that the benefit could accrue in terms of lower rate or a more restrictive scope under more than one Convention which may be signed after 1-9-1989 between India and a State which is an OECD member. The purpose of clause 7 of the Protocol is to afford to a party to the Indo-France Convention the most beneficial of the provisions that may be available in another Convention between India and another OECD country. The said case law is also affirmed by the Hon’ble Mumbai Tribunal in the case of Entertainment Networks (India) Ltd. v. Joint Commissioner of Income-tax, Range-16(1), Mumbai [2019] 102 49.

Reference is also invited to following case laws of various Tribunal(s) / Courts which have taken a similar view as mentioned supra:

  • Apollo Tyres Ltd. v. Commissioner of Income-tax, International taxation [2018] 92 166 (Karnataka HC)
  • Deputy Commissioner of Income-tax (International Taxation), Vadodara v. Sun Pharmaceuticals Laboratories Ltd. [2018] 96 105 (Ahemdabad Trib.)
  • Shell Global Solutions International BV v. Income-tax officer, Ward 1(4), Baroda [2015] 64 3 (Ahemdabad Trib.)
  • Sandvik AB v. Deputy Director of Income-tax (International Taxation) – II Pune [2015] 61 31 (Pune Trib.)

It can be said that the analysis of the applicability of the MFN clause in connection with any other beneficial provisions of other tax treaty (say, ‘Make Available’ clause) is like searching a hidden treasure wherein one has to go through the maze of various treaties to analyse whether there is any beneficial provision (say, ‘Make Available’ clause) which is available to a third state through the subsequent tax treaty and that can be available to the contracting state having MFN clause in its tax treaty.

Though, there are certain adverse judgments / ruling of various Court / Tribunals / Advance Rulings ,it would not be too aggressive to say that the most beneficial of the provisions that may be available in Convention shall also apply to another convention by virtue of ‘Most Favoured Nation’ clause. Further, it is pertinent to note that various Court / Tribunal / Advance Rulings which have pronounced adverse judgements / rulings have not taken any earlier favourable judicial precedents into account on the subject at the time of pronouncement of the judgement.

Note: The conclusions reached under this article are not binding upon the tax / legal authority or any court and no assurance can be given that a position contrary to that expressed herein will not be asserted by a tax / legal authority and ultimately sustained by a court. Accordingly, we are not responsible for any liability whatsoever on account of any person taking actions based on this article.



[3] The factors stated are only illustrative and not exhaustive in list

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  1. Subramanian Natarajan says:

    A useful article indicating deep depth and understanding of tax treaties. For a senior CPA like myself, it showed a great clarity. I request him to write more articles which lead one from darkness to light.

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June 2024