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Issues: (i) Whether the earlier treatment of similar receipts in another assessment year bound the Assessing Officer on the principle of consistency and judicial discipline; (ii) Whether maintenance support and education and training receipts linked to software sales were taxable as fees for technical services and whether the 'make available' condition under the treaty was satisfied.
Issue (i): Whether the earlier treatment of similar receipts in another assessment year bound the Assessing Officer on the principle of consistency and judicial discipline.
Analysis: Taxation does not operate on the basis of res judicata, and each assessment year is a separate unit. The Assessing Officer is therefore entitled to make an assessment according to the facts and law applicable to the relevant year, even if a different characterization was adopted in an earlier year.
Conclusion: The plea based on consistency and judicial discipline was rejected, and the issue was decided against the assessee.
Issue (ii): Whether maintenance support and education and training receipts linked to software sales were taxable as fees for technical services and whether the 'make available' condition under the treaty was satisfied.
Analysis: The receipts for maintenance support and education and training services were found to be intricately and inextricably connected with the software sold and were rendered in connection with its utilisation. Once the software receipts themselves were not taxable, the related and linked service receipts could not be independently taxed as fees for technical services. The Revenue also failed to show that the services made available technical knowledge, experience or skill within the meaning of the treaty.
Conclusion: The related service receipts were held not taxable as fees for technical services, and the addition was directed to be deleted in favour of the assessee.
Final Conclusion: The appeal succeeded only in relation to the disputed service receipts, while the challenge based on consistency failed.
Ratio Decidendi: In income-tax proceedings, there is no res judicata between assessment years, and services that are inseparably connected with non-taxable software receipts cannot be taxed as fees for technical services absent proof that the treaty 'make available' test is satisfied.
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