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TMI Blog2024 (10) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019-20 and 2020-21 in pursuance to directions of learned Dispute Resolution Panel (DRP). 2. The common substantive issue arising in all these appeals relate to taxability of the amounts received by the assessee from the Indian customers towards supply of software updates and patches and on-call support services as Fee for Technical Services (FTS)/Fee for Included Services (FIS) under the Income Tax Act as well as under India - USA Double Taxation Avoidance Agreement (DTAA). 3. Briefly the facts relating to this issue are, the assessee is a non-resident corporate entity and is incorporated in the United States of America (USA) and is a tax resident of USA. As stated, the assessee is engaged in the business of developing, manufacturing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancillary to the sale of computer software. However, he observed that this cannot be the only parameter for determining whether the amount received is FTS/FIS. He observed, since, services rendered are technical and consultancy in nature and they are also making available technical knowledge, know-how, skill etc. to the service recipient, the receipt would be taxable under Article 12(4)(b) of the Treaty and not under Article 12(4)(a) of the Treaty. Having held so, he further held that in absence of any bifurcation between on-call support services and software updates and patches, the entire receipts have to be treated as FIS under Article 12(4)(b) of the treaty. Accordingly, he brought the receipts to tax at 10% on gross basis in all the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le condition. In support of his contention, learned counsel relied upon a catena of judicial precedents as furnished in the case-law compilation. 8. Drawing our attention to the copy of distributors agreement placed in the paper-book, learned Departmental Representative submitted, along with software updates and patches, the assessee also provides support services, which are in the nature of technical/consultancy services coming withing the ambit of FIS as provided under Article 12(4) of India - USA DTAA. He submitted, the Assessing Officer has also observed that while rendering such services, the assessee has made available technical knowledge, know-how, skill etc. Thus, he relied upon the observations of Assessing Officer and learned DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... updates and patches, as also, on-call support services. In assessment year 2014-15, while examining the nature of receipts earned by the assessee, the Assessing Officer held that the amount received towards supply of software products/updates and patches is taxable as royalty income. Whereas, the receipts from on-call support services, being ancillary to supply of software products/updates and patches, are taxable as FIS under Article 12(4)(a) of the Treaty. The same line of thinking of the Assessing Officer continued till assessment year 2017-18. 11. Notably, in assessment year 2014-15, when the dispute ultimately travelled to the Tribunal, in order dated 17.02.20222 passed in ITA No. 6064/Del/2017, the Tribunal held that the receipts ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the 'make available' condition. A reading of the assessment orders should reveal that except making general observations that while rendering services the assessee has made available technical knowledge, know-how, skill etc. to the recipient of services, the Assessing Officer has not brought on record any cogent material/ evidence to establish such fact. Even, same is the position with learned DRP as no effort has been made by learned DRP to establish that 'make available' condition stands satisfied. 13. Now, it is fairly well settled that technical knowledge, knowhow, experience, skill etc. are made available to a service recipient when the service recipient is capable of performing such services independently on its own without requiri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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