E-proceedings scrutiny assessment and software licence receipts under India-Singapore DTAA: manual signature invalid; FTS addition deleted

Where scrutiny assessment was completed through mandatory CBDT-prescribed e-proceedings, the AO was required to digitally sign the final assessment order; a manually signed order violated the statutory manner requirement and constituted an incurable defect, rendering the assessment invalid and liable to be quashed. Separately, receipts from sale of off-the-shelf software licences and related services, under a limited non-exclusive, non-transferable right to use with no right to sub-licence, did not satisfy the "make available" condition under the India-Singapore DTAA; applying SC in Engineering Analysis, the licence fee could not be characterised as FTS, resulting in deletion of the addition on that ground.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether a final assessment order completed under the 'E-Proceedings' framework is invalid and liable to be quashed if it is signed manually instead of being digitally signed by the Assessing Officer, in view of the applicable CBDT instructions.

(ii) Whether receipts from licensing of standardized, off-the-shelf software and associated services to Indian customers, through distributors and directly, can be characterized as Fee for Technical Services where the end-user is granted only a limited, non-exclusive, non-transferable right to use the software and no specialised knowledge or skill is made available under the India-Singapore DTAA.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of manually signed final assessment order in an 'E-Proceedings' assessment

Legal framework (as discussed by the Tribunal): The Tribunal considered the CBDT Instruction No. 1/2018 dated 12.02.2018 governing scrutiny assessments conducted through 'E-Proceedings'. The Tribunal specifically relied on the Instruction's requirement that all departmental orders/communications/notices issued through the 'E-Proceeding' facility are to be signed digitally by the Assessing Officer.

Interpretation and reasoning: The Tribunal found, on the face of the record, that the assessment was made under 'E-Proceedings' but the final assessment order was signed manually. It held that the CBDT instruction mandates digital signature for such orders and does not provide any exception permitting manual signing. The Department's explanation that system-related constraints and administrative transfer/leave issues necessitated manual signing was not accepted as a legally permissible deviation, because no Board-issued exception was produced despite opportunity. The Tribunal treated the CBDT-prescribed procedure as binding on the Department and held that where a procedure is prescribed for doing an act in a particular manner, it must be done in that manner alone. It also held the Revenue's relied-upon Tribunal decision to be distinguishable on its facts and not applicable to justify manual signing here.

Conclusion: The Tribunal held that since the assessment was completed in 'E-Proceedings' and the final order was manually signed contrary to the binding instruction, the order suffered from an incurable defect and was liable to be quashed on this ground alone.

Issue (ii): Characterisation of software licence fee and services receipts as Fee for Technical Services

Legal framework (as discussed by the Tribunal): The Tribunal examined the characterisation of receipts under the India-Singapore DTAA, noting the presence of the "make available" condition for Fee for Technical Services, and applied the Supreme Court's decision in Engineering Analysis Centre of Excellence on tax treatment of software licensing receipts in comparable circumstances.

Interpretation and reasoning: The Tribunal proceeded on undisputed facts that the assessee supplied standardized/off-the-shelf software to end customers (directly and via distributors), granting only a limited, non-exclusive, non-transferable licence to use the software, without any right to sub-lease. It further accepted that no specialised knowledge or skill was imparted to the end user and therefore the make available condition in the DTAA was not satisfied. On these facts, the Tribunal held the matter to be squarely covered by the Supreme Court's ruling in Engineering Analysis, leading to the conclusion that such licence fee receipts could not be treated as Fee for Technical Services.

Conclusion: The Tribunal held that the software licence fee (and related receipts as examined) cannot be characterised as Fee for Technical Services on the facts found, and allowed the assessee's grounds on merits as well.

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