Delhi ITAT Ruling on India-UK DTAA: Virtual PE and 'Make Available' Clause in Offshore Services
The taxation of cross-border transactions, particularly those involving offshore technical and engineering support, continues to be a highly litigated domain under the Income Tax Act 1961. A recurring point of friction between multinational entities and the Indian Revenue authorities revolves around the constitution of a Permanent Establishment (PE) and the interpretation of the "make available" condition embedded in various Double Taxation Avoidance Agreements (DTAAs).
In a recent and highly significant judicial development, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) delivered a comprehensive order in the case of Bechte Limited Vs ACIT. The ruling, dated 28/07/2026, pertaining to the Assessment Year (AY) 2022-23, addresses critical questions regarding the existence of a PE based on remote service delivery, the legality of simultaneous substantive and protective assessments on the same assessee, and the nuanced application of the Fees for Technical Services (FTS) framework under the India-UK DTAA.
This article provides a detailed summary and legal analysis of the Tribunal's decision, breaking down the factual matrix, the arguments presented, the judicial precedents evaluated, and the final verdict that remands the FTS issue for fresh adjudication.
1. The Factual Matrix of the Dispute
The assessee, Bechte Limited, is a corporate entity incorporated and tax-resident in the United Kingdom. The core business operations of the assessee revolve around delivering specialized support services for massive engineering and infrastructure initiatives.
In India, the assessee has an Associated Enterprise (AE) operating under the name M/s Bechtel Engineering & Construction India Private Limited (BECI). During the financial period relevant to AY 2022-23, BECI was engaged in executing substantial infrastructure contracts for its ultimate client, M/s Reliance Industries Limited (RIL). To fulfill its obligations towards RIL, BECI entered into a service agreement with the assessee to procure composite support services. These services encompassed technical advisory, procurement support, and complex engineering inputs.
A critical factual element in this arrangement was the execution of a new service agreement between the assessee and BECI, which came into effect on 01/01/2020. Under this revised framework, the assessee rendered all contracted services entirely from offshore locations outside India, without any physical deployment of its personnel to Indian territory.
The assessee filed its return claiming that the total receipts from BECI, amounting to Rs. 62,11,01,636/-, were not chargeable to tax in India as they did not satisfy the threshold for FTS under the India-UK DTAA, nor did the assessee constitute a PE in India.
2. The Revenue's Dual Assessment Strategy
The assessment proceedings witnessed a rather unusual approach adopted by the Revenue authorities. Initially, the Assessing Officer (AO) proposed to tax the disputed sum of Rs. 62,11,01,636/- exclusively as FTS, arguing that the technical inputs provided by the assessee fulfilled the "make available" criteria under Article 13 of the India-UK DTAA.
However, the trajectory of the assessment shifted dramatically upon the intervention of the Dispute Resolution Panel (DRP). Relying heavily on historical findings from previous assessment cycles—specifically AY 2016-17—the DRP concluded that the assessee maintained a PE in India. Consequently, the DRP issued binding directions to the AO to assess the receipts as business income under Section 44DA of the Income Tax Act 1961 on a substantive basis.