Software sale receipts cannot be taxed as technical services without a distinct service element and make available evidence.

Receipts from distribution of software products purchased from third-party vendors could not be re-characterised as fees for technical services absent evidence of a separate service element in the invoices or any distinct technical service rendered. The record was materially similar to the earlier year, and there was no cogent basis to treat the receipts differently under the Income-tax Act, 1961. The India-Singapore treaty also required the make available condition, but the facts did not show that technical knowledge, know-how or skill had been enabled for independent future use. The additions were therefore unsustainable and were deleted.

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Issues: Whether receipts from sale of software could be re-characterised as fees for technical services and taxed under the Income-tax Act, 1961 and Article 12(4)(b) of the India-Singapore Double Taxation Avoidance Agreement in the absence of proof that technical know-how, skill or experience was made available to the recipient.

Analysis: The receipts in question arose from distribution of software products purchased from third-party vendors. The material on record did not show that the invoices represented any separate service component or that the assessee had rendered technical services distinct from software sales. The factual position was found to be materially similar to the earlier assessment year, and there was no cogent basis for the reassessment authority to re-characterise the receipts as fees for technical services. In any event, the treaty provision required satisfaction of the make available condition, and the record did not establish that the assessee had enabled the recipient to apply technical knowledge, know-how or skill independently in future.

Conclusion: The additions were unsustainable and were directed to be deleted; the issue was decided in favour of the assessee.

Final Conclusion: The software-sale receipts could not be taxed as fees for technical services on the facts found, and the impugned additions were set aside.

Ratio Decidendi: Mere sale or distribution of software, without proof of a distinct service element and without satisfaction of the make available requirement under the treaty, cannot be re-characterised and taxed as fees for technical services.

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