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2023 (5) TMI 1043 - AT - Income TaxIncome deemed to accrue or arise in India - Taxability of “fee for technical services” on payments received from provision of income from maintenance and other support and training services under India Singapore DTAA - whether the said services satisfying “make available” clause? - AO held that, not only its fees for technical services under the provision of Section 9(1)(vii) but also falls in the ambit of Article 12(4) of India-Singapore DTAA - whether income from rendering maintenance and other support services is taxable in India as FTS under Article 12 (4) of India-Singapore DTAA? - HELD THAT:- The in-house support team of the Indian customers is mainly a centralized point of contact for purpose of co-ordination and related activities of Indian customers with the assessee. Since, the role of in-house support team involves coordinating with the assessee regarding MSEA software programme supplied by the assessee, the personnel in such In-House support team / IT team need to be competent to know how to use the software program to be able to effectively explain the query / bug to MSEA which would then enable MSEA to identify the issue and resolve the same. This fact is clearly borne out from the relevant clauses of the agreements which has been filed before us and also which has been noted in the foregoing paragraphs. For training part there is no addition in the functionalities through such update which are only standard updates and not customization. The entire maintenance service contract is dependent on the software sublicensing agreement. In case of separate agreements for sublicensing and maintenance, there is a termination clause which provides that maintenance services will automatically terminate if software sublicensing contract is expired or terminated. Here, fees for maintenance services are annual and based on a percentage of licence fee and is not dependent upon the number of queries / bugs raised or resolved by the assessee. If it is of recurring annual fees, there is no question that assessee was making available any technology or knowhow of the Indian customers on year to year basis as has been interpreted by the ld. AO. Assessee is having the technical expertise in the software sub-licensed by it. If there is any bug or problem faced by the customers while using the software, assessee provides trouble shooting to fix those bugs and helps them for maintaining and support of the software used by the clients. This does not mean that assessee had made available any technology in software. Services have been provided on on telephone, on email, remote login and providing training for the software and therefore, it is “make available” - If assessee is resolving the problems on software sub-licensed by it, this does not per se mean that any technology has been transferred or any know how has been make available which can enable the inhouse team of the customer to acquire the technology. Such maintenance support services and training services do not fall in the ambit and nature of FTS within Article 12(4) of India Singapore DTAA, as these services do not make available any technical skill knowledge or expertise etc., which can enable Indian customer to apply the technology content therein. Thus, we hold that these services are not liable to be taxable. In the result, this issue is passed in favour of the assessee.
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