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TMI Blog2023 (8) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... s of America (USA) and is a tax resident of USA. As stated by the Assessing Officer, the assessee is a Developer, Marketer, seller of Robotic Process Automation (RPA) and related products and services. The assessee develops and sales RPA software and Digital Workforce Platform (DWP). The RPA services enable customers to automate business process through the use of configurable software bots. 3. In the assessment years under dispute, the assessee earned Revenue from two streams in India, i.e., fee from software license and fee from rendering of services. Fee from rendering of services was offered to tax in India by the assessee by treating it as Fee for Technical Services (FTS)/Fee for Included Services (FIS). Whereas, the receipt from sale of software licence was treated as business income and not offered to tax in India in absence of PE in terms of Article 7 of India - USA Double Taxation Avoidance Agreement (DTAA). In course of assessment proceedings, the Assessing Officer called upon the assessee to furnish the details of all Associated Enterprises (AEs) in India and the international transactions entered with them in the relevant assessment years. He also called upon the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 25% of the revenue earned from sale of software licences as the profit attributable to the PE. Accordingly, he framed the draft assessment orders. 6. Against the draft assessment orders so framed, the assessee raised objections before learned DRP. However, the objections were rejected. 7. Before us, learned counsel appearing for the assessee submitted that while concluding that the assessee had a fixed place PE in India, the Assessing Officer has completely ignored the facts brought on record. He submitted, in course of assessment proceedings, the assessee had not only furnished the list of employees visiting India, but also furnished the purpose of their visit. He submitted, the purpose of visits can be classified into three categories. He submitted, there are 4 visits of employees for 41 days towards shareholders activities. 9 visits of employees for 126 days are for stewardship activities and 7 visits for 104 days are for marketing, events and activities, where the visiting employees did not access or visited the premises of the Indian AE. Rather, they were staying at hotels, where the meetings and conferences held. He submitted, 4 visits were for 108 days for imparting trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees of the assessee had the right to use the premises of AE for developing RPA software, providing technical support to customers and distributing the RPA software licences to the customers. He submitted, the Assessing Officer has not brought any material on record to establish that the visiting employees had free access to the premises of the Indian AE. Neither, he brought the evidence to prove that the premises were at the disposal of the visiting employees. 10. On the contrary, he submitted, the assessee furnished evidence to establish that the premises of India AE was not at the disposal of the visiting employees. He submitted, no material was brought on record by the Assessing Officer to prove that all the employees visiting India visited the office of the Indian AE. He further submitted, the AO has not brought on record any material to prove that the visiting employees have either developed or sold any licence for the RPO software from the premises of Indian AE. Rather, the assessee furnished evidence to demonstrate that RPA software licences were sold from outside India and payments were also made outside India. Thus, he submitted, enough evidences were furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and product support Edmundo Costa US MBA VP and GM (Latin America) For the period in question, he was travelling to Europe to meet KPMG, De. loitte UK Gerry Rice US B.S. VP, Finance Assess and standardize financial processes at India level HaeWon Bunzel US B.S Visual Designer Provide guidance on technical standards Jayaraman Balasubramanian US MBA VP of Product Management in 2017; Is now SVP of Product Management Assess and review documentation processes Jon Stueve US M.S. Manager, Automation Anywhere Training Set-up training Jonathan Malkin US B.S. lead, Sales Engineering Assist with setting-up sales engineering function at India level Joseph Crowley US B.S. Regional Sales Director To receive sales training Judy -Tran US MBA Director, Renewals Streamline processes in respect of sales operations Kajaai Bhatti US B.S. Senior Marketing Manager (Events) Organising IMAGINE. conference in India . . Kathleen Holmgren US MBA Member, Board of Directors Meet employees and gain understanding of India operations Manish Rai US MBA and MSEE VP, Product Marketing Assess marketing opportunities at India level Mihir Shukla US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord to prove that the sale of any licence for the RPA software was concluded in India. 14. On the contrary, the assessee furnished evidence to demonstrate that licences were sold from outside India. He submitted, when there is no evidence to demonstrate that the entire licence fee received by the assessee was through the PE, 25% out of such licence fee cannot be attributed as profit of the PE. He submitted, the Assessing Officer committed error in applying Rule 10(i) instead of applying Rule 10(ii) for attribution of profit. He submitted, as per Article 7(1)(c) of the tax treaty, the profits of the foreign entity may be taxed in India only so much of on them as is attributable to other business activity carried on in India of the same or similar kinds, as those effected through the AE. In other words, attribution of profit to the PE should be in proportion to the revenue earned in India. He submitted, in course of assessment proceeding, the assessee had furnished extracts of the Audited Global Financial Statement. Therefore, by applying Rule 10(ii), profit will be (-)48% of the global revenue as the assessee has made loss globally. Therefore, the same ratio should be applied to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NZ Support Services India Pvt. Ltd. As per the scope of work under the Master Services Licences Agreement, all services relating to those that the parties agreed will be supplied by the assessee. 18. As per the terms of the agreement, the assessee grants ANZ, a limited non-exclusive, non-transferable enterprise wide Annual Subscription Licence to use the products only for ANZ internal use in connection with ANZ ordinary business operations. The agreement further stipulates that ANZ may (a) install the server software on each service cline owns or controls, and (b) reproduce and install the Client Software on Client Computers client owns or controls. Client may make copies of the products for backup, testing, disaster recovery or archival purposes and may make a reasonable number of copies of the product documentation for internal use, provided client also reproduces of such copies any copyright, trademark or other proprietary markings and notices contained in the products and product documentation and does not remove any such marks from the original. In addition to the sale of licnece, the assessee also provides services in relation to RPA software. 19. As could be seen from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are as under: Name Citizenship Education Qualification Post held in The company Details description of work done in India during the assessment year _____ Anthony Lopez US B.A. VP, Global Talent Acquisition Participated in certain hiring matter. Anubhav Saxena US B.E EVP, Partnerships, Strategy & Operations Organising IMAGINE conference- in India and sought participation of existing partners in India Aymeric Ratel US M.S. VP, Regional Sales To receive sales training Clyde Rasheed Hosein US M.S. Chief Financial Officer Meet and greet India employees David Robert Keyes US M. S . Director, Strategic Partnerships Receive training in respect of sales and product support Edmundo Costa US MBA VP and GM (Latin - America) For the period, in question, he was travelling to Europe to meet KPMG, Deloitte UK Gerry Rice US B.S. VP, Finance Assess and standardize financial processes at India level HaeWon Bunzel. US B.S Visual Designer Provide guidance on technical standards Jayaraman. Balasubramanian US MBA VP of Product Management in 2017; Is now SVP of Product Management Assess and review documentation processes Jon Stueve US M.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not appear that any of the employees visiting Indian were carrying on any activity with regard to sale of licence. Neither from the email dump, nor any other material available on record, it is forthcoming that the employees visiting India were involved in the activity of sale of licence. 23. As could be seen from the details available, the purpose of visit are for shareholder's activity, stewardship activity, marketing events, for receiving training etc. Though, the Assessing Officer has referred to the information received under section 133(6) of the Act from the Indian AE, however, such information nowhere reveals that the assessee was carrying on any activity of sale of licence through its employees by utilizing the premises of AASPL in India. There is nothing on record that could even remotely suggest that assessee's employees were carrying out core business activities, either wholly or partly from the premises of AASPL. 24. On the contrary, from the assessment stage itself the assessee has clarified that its employees had access to AASPL premises only with prior permission. The assessee has further stated that visiting employees were given temporary space for meeting w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o more than one customer, it can use the place of business for internal administrative and bureaucratic work. However, factually the Assessing officer has failed to satisfy any of the aforesaid tests. 26. Facts on record reveal that, though, many of the employees visited India, but there is no evidence to suggest that all of them used the premises of AASPL. Even assuming that all those employees used the premises of AASPL but there is no evidence to suggest that they used the premises for the activity relating to the sale of software. Undisputedly, the receipts, which are sought to be attributed to the PE are from sale of software licence, however, as could be seen from the facts on record, the transfer of licence takes place, once, the licence key is generated and made available to the licencee after execution of the contract. Insofar as the receipts from provision of services, undisputedly, the assessee has offered them to tax. Though, learned Departmental Representative has alleged before us that the licence agreement was executed in India contrary to the claim of the assessee, however, no documentary evidences has been brought to establish such facts. 27. Thus, considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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