9911796707
TMI Blog2025 (1) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of additional services as Fee for Technical Services (FTS). 3. Briefly, facts are, the assessee is a non-resident corporate entity incorporated under the laws of Singapore and is a tax resident of Singapore. For the assessment year under dispute, assessee filed its return of income on 11.10.2019 declaring income of Rs. 56,81,95,010/- and claiming refund of Rs. 6,29,61,021/-. As stated by the Assessing Officer, the assessee is engaged in the business of providing/sublicensing software to entities in the Financial Service Sector and also provides maintenance and support services and training services. In course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee had received revenue on the following account: i. Sub licensing of Software Rs.10,80,65,944/- ii. Maintenance and Support Services Rs.39,86,26,668/- iii. Training Services Rs. 2,50,435/- iii. Additional Services such as Implementation and migration of software Rs.16,93,17,904/- Whereas, assessee has claimed exemption in respect of these income stating that in absence of a permanent establishment (PE), the receipts in the nature of business income cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (DR) relied upon the observations of the Assessing Officer and learned DRP. 7. We have considered rival submissions and perused the material on record. The crux of the issue is whether the receipts in dispute qualify as FTS under Article 12(4)(b) of the India- Singapore Treaty DTAA. A careful reading of the said provision makes it clear that a receipt can be treated as FTS if such receipt is towards provision of technical management or consultancy services. Further, in course of rendition of such services the service provider has made available technical know-how, knowledge, skill etc. to the service recipient. So as to enable the service recipient to independently apply such technical knowledge, know-how, skill etc. The facts of the present appeal reveal that the assessee is providing identical nature of services year on year basis. Had it been the case that the assessee has made available technical knowledge, knowhow, skill etc. to the service recipient, there would not have been any requirement for the assessee to provide such services on recurring basis. This is so because, once the technical knowledge, know-how skill etc. is made available to the service recipient, it enable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance, 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 Relevant clauses from the sample agreements During the year under consideration, the Appellant has rendered maintenance and other support services to the in House support team of the Indian customers by way of telephone / email / remote login assistance with respect to usage of the software program. Such assistance consists of responding to the Indian customer's reasonable questions communicated by the In-house support team concerning use of Software program and resolving the discovery of bug. For example, there could be a time gap in input of data and the output generated i.e., Indian customer inputs data in the software at 10.54 am but the output is generated at 11.00 am. This time gap is a bug as the reports should be generated within seconds / a minute and timings cannot be haywire. The Appellant submits that these are the kind of bugs which the Company is resolving and providing by way of software maintenance. Further, the Company submits that during the year under consideration there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's technical team to help them resolve the errors / bugs. As you will appreciate the Indian customers to whom the Appellant caters to are generally large financial organizations with many employees in its organization. For example, say SBI, which is one of the customers to whom the Appellant sub-licenses its software, has lakhs of employees, some of whom are using the Murex Software. Similar to any large organization, SBI has also established an internal Information Technology ('IT') team i.e. In-House support team. The employees using the MSEA software raise their software usage related queries / bugs to the In-House support team. Thereafter, the In-House support team co-ordinates with the Appellant for resolving such queries / bugs. If every employee in the organization co-ordinates with the Appellant for their independent queries / bugs, it would become difficult for the Appellant to resolve the queries / bugs. Thus, the In House support team of the Indian customers is mainly a centralized point of contact for purpose of coordination of queries / bugs and related activities of Indian customers with MSEA. Since the role of In House support team involves coordinating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Training Upon the request of SUBLICENSEE, and at times and locations to be mutually agreed between the parties, MSEA will train SUBLICENSEE and Sub licensee Affiliates on the proper usage of the Software Program. Updates to the software sublicensed: As a pan of the maintenance services, the Appellant also provides updates to the software program. Such updates include e.g., 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. The updates are standard, provided to all the customers, not customized and the installation of such updates is at the discretion of the Indian customers. 1.2 Updates 1.2.1 Updates: From time to time, MSEA will provide SUBLICENSEE with an update to the Software Program including, for example, correction of errors, improvements concerning the existing functioning of the program or the screens, and program changes intended to improve the calculations, results and formulae of the Software Program. Additional functionalities shall not generally be delivered in connection with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh telephone / email/ login assistance with respect to usage of the software programme. Such assistance is by responding to reasonable questions communicated by the inhouse support team concerning the use of software programme and resolving the discovery of bug in respect of software supplied by the assessee. Before us, certain instances and examples have been cited as to how the assessee has been resolving the issue arising out of bugs provided by the software during the software maintenance. Further there are no onsite maintenance and support services, assistance provided by the assessee to the Indian customers. Apart from that, another very important fact is that there is no permanent establishment or any maintenance team of the company in India. Indian customers have in-house support team which is required to understand the source / requirements from the Indian customers. Employees of the Indian customers who are using the software, if they happen to come across any problem, then the same is referred to the assessee's technical team to help them to resolve errors / bugs. These Indian customers are mainly big organizations and the one of the biggest customer was SBI, to whom the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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. 13. Another allegation is that 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. Thus, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from additional services as income simply because it had a service P.E. in India, which is not the case in the impugned assessment year. 13. Learned D.R. strongly relied upon the observations of the Assessing Officer and learned First Appellate Authority. 14. We have considered rival submissions and perused the material on record. Facts on record reveal that the additional services rendered by the assessee are only to the extent of migration of software from old version to new version. The Assessing Officer has not brought on record any material/ evidence to demonstrate that in course of rendition of such services, the assessee has transferred or made available any technical knowledge, know-how, skill etc. to its clients in India so as to enable them to perform such services independently without requiring the aid and assistance of the assessee. If the Department seeks to invoke Article 12(4)(b) of the treaty the burden is entirely on the department to demonstrate the fulfillment of make available condition through cogent evidence. Unfortunately, the Department has failed to do so. The other allegation of the Assessing Officer that the assessee has offered similar income to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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