TMI Blog2023 (5) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... am 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idance Agreement between India and obtained from the Singapore ( DTAA / Tax Treaty') and holds a valid Tax Residency Certificate (TRC) Authorities in Singapore. Accordingly, assessee is eligible to claim the Tax Treaty benefits which is undisputed. 4. During the year under consideration, the assessee has sublicensed software and provided related maintenance and other support services and training services as well as additional services with respect to the said sub-licensed software and has earned India sourced income from the same. The assessee's position with respect to income from sub-licensing of software and income from additional services has been accepted by the ld. Assessing Officer. However, the Income from maintenance and other support services and training services was alleged by the ld. AO to be in the nature of Fees for Technical Services (FTS) on account of the services satisfying the criteria of make available under the India Singapore Tax Treaty. 5. The ld. AO after analyzing certain relevant portion of the relevant agreements drew following inferences:- 1. Technical expertise is required on part of the assessee to meet the challenges in mainten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained therein. 7. Thus, what is required is to be seen whether the said services satisfying make available clause. The sum and substance of the assessee s explanation before us has been that:- The Indian customer (including its In-House support team) is not able to apply any expertise/technology contained therein or use knowledge on its own, without recourse to the Company. Further, the Indian customer is not at liberty to use the technical knowledge, skill, know-how and process of the Company in their own right; and The Indian customer would not be in a position to perform services (of the nature provided by the Company) In-House. They have to necessarily seek services of the Company time and again. 8. Further before us, the ld. Counsel for the assessee has given comparison of relevant clauses of simple agreements submitted by the assessee that the software sub-license and services agreement as well as maintenance agreement vis- -vis nature of maintenance, other support services and training services rendered by the assessee which have been highlighted as under:- Nature of services rendered / facts of the case of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is available, a reduction of the effects of, or a work-around solution with respect to, the Error or Critical Error (e.g. reversion of a change in configuration or a change in the way of using the Software Program by the Users to its previous value) Article 1: Maintenance Services 1.1.1 Telephone' and Email Assistance to SUBLICENSEE or Sublicensee Affiliates: MSEA will provide telephone and/or email assistance to the In-House Support Group (as defined in Article 1.3.1 hereof) during MSEA's normal business hours (09:00 to 18:00 Singapore time, Monday through Friday excluding holidays in Singapore)...Such assistance will consist of responding to SUBLICENSEE'S reasonable questions concerning SUBLICENSEE'S or the Sub licensee Affiliates' use of the Software Program, as the case may be... The Role and requirement of the la-House support team:- As highlighted in the agreement, the In-House support team is required to understand the concerns / requirements from the Indian customers employees who are actually using the software and explain the same to the Appellant's technical team to help them resolve the errors / bug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3.2 Maintenance Services. ... The In House support Group will be responsible for all communications with MSEA in respect of any questions encountered in any Site concerning SUBLICENSEE'S use of the Software Program Description of training provided as part of the Maintenance services: The Company submits that it provides training to the end users and In-house team members of the Indian customers only with respect to the proper usage of the program. Considering it is a specific software for financial sector customers, it is necessary for the Appellant to provide training to the Indian customers else the software would be of little value / use to the said customers. In simple terms, such training is akin to training provided to an individual for operating any product such as a software like SAP, Tally, Microsoft Excel or even a refrigerator / water purifier. Further, the training is generally provided at the initial stage when the software is sub-licensed and subsequently provided only on need basis e.g. if there is an additional module which is sub-licensed or there is a change in the Indian customers users / In-House support team etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said fees are not based on the number of queries / bugs raised / resolved by the Appellant. The said fee increases year on year according to the agreed inflation index which implies that there is no diminishing services and the Indian customers year on year continue with such maintenance service contract. Article III Maintenance Fees 3.1 Annual Basic Maintenance Fee: 3.1. 1 SUBLICENSEE shall pay MSEA in advance on an annual basis, an annual basic maintenance fee for the Software Program (for one hundred (100) named Users as set forth in Annex 1-D of the Sublicense Agreement) as follows: Year 2005 Year 2006 Year 2007 Year 2008 Year 2009 Year 2010 and after USD 120, 000 USD 180,0 00 USD 240,00 00 USD 300,0 00 USD 360, 000 USD 360, 000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, 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. 11. In so far as the training part is concerned, the assessee company provides training to the end users and in-house team members of the Indian customers only with respect to the proper usage of the program. This training is a akin to training provided for operating any product, software and it is generally provided at the initial stage when the software is sub-licensed and subsequently provided only on need basis. Apart from that, as a part of maintenance services, assessee also provides updates to the software programmes like correction of errors, improvements concerning existing functioning of program, and changes intended to improve calculations / results / formulate of software program etc. There is no addition in the functionalities through such update which are ..... 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