Standard infrastructure and referral services do not create royalty or FTS where no right to use equipment, process, or know-how is granted.
Offshore infrastructure data centre charges, referral fees and member login fees were analysed under the India-Singapore treaty and treated as non-taxable where the services only provided standard infrastructure or customer support. The receipts did not confer any right to use equipment, software, a process or other protected property, and they did not make available technical knowledge, skill, know-how or a process. On that basis, the tribunal view recorded in the text was that such charges fall outside royalty and, for referral services, also outside fees for technical services, consistent with earlier coordinate bench and own-case decisions.
Issues: (i) Whether infrastructure data centre charges received by the assessee were taxable as royalty; (ii) whether referral fee or other service charges were taxable as royalty or fees for technical services; (iii) whether member login fee was taxable as royalty.
Issue (i): Whether infrastructure data centre charges received by the assessee were taxable as royalty.
Analysis: The charges related to provision of infrastructure data centre services rendered from Singapore through the assessee's hardware, security devices and personnel. The recipient entities did not acquire any right to use equipment, software or a process, and the services did not involve transfer of any technical knowledge or embedded software. The issue was covered by earlier coordinate bench decisions on identical facts.
Conclusion: The infrastructure data centre charges were not taxable as royalty and the addition was deleted in favour of the assessee.
Issue (ii): Whether referral fee or other service charges were taxable as royalty or fees for technical services.
Analysis: The referral activity consisted of providing customer leads and related support without making available any technical knowledge, skill, know-how or process to the payer. On the India-Singapore treaty framework, such services did not satisfy the conditions for fees for technical services, and the receipts were also not royalty. The issue was governed by earlier decisions in the assessee's own case on the same factual pattern.
Conclusion: The referral fee or other service charges were not taxable as royalty or fees for technical services and the addition was deleted in favour of the assessee.
Issue (iii): Whether member login fee was taxable as royalty.
Analysis: Member login services were treated as a standard facility similar to the infrastructure data centre services. No exclusive right in copyright, process or equipment was granted, and the service did not amount to use or right to use any process or equipment. The matter was also covered by earlier orders in the assessee's own case.
Conclusion: The member login fee was not taxable as royalty and the addition was deleted in favour of the assessee.
Final Conclusion: The Tribunal held that all disputed receipts arising from the impugned services were outside the scope of royalty under the Act and the treaty, with the result that the assessee succeeded on the substantive grounds.
Ratio Decidendi: Where offshore service charges merely reflect provision of standard infrastructure or referral support without conferring a right to use equipment, process, software, or making available technical knowledge, skill, know-how or process, the receipts are not taxable as royalty or fees for technical services under the India-Singapore treaty framework.