https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=753715 https://www.taxtmi.com/caselaws?id=753715 Accrual of income in India - Taxability as Fees for Included Service (FIS)/Fees for Technical Services(FTS) - assessee had received an amount from Indian subsidiary on account of rendition of management service - assessee is a non-resident corporate entity and incorporated in Singapore engaged in the business of providing management services and sales of software license to its customers in India - assessee has entered into an Inter Company Management Services Agreement with the Indian Subsidiary - HELD THAT:- For rendition of such services, the assessee receives certain amounts towards fees from the Indian subsidiary. The crucial issue requiring consideration is whether in course of rendition of such services, the assessee has made available technical knowledge, know- how, skill, etc. to the employees of the Indian Subsidiary, so as to enable the Indian Subsidiary to perform such services themselves without further aid and assistance of the assessee in future. As could be seen, from the observations of the AO, except making a general statement that the make available condition u/A 12 of the Income Tax Treaty is satisfied, he has failed to demonstrate or bring out on record any convincing reasoning to establish that, in course of rendition of services, the assessee has made available technical know-how, knowledge, skill, etc. to the service recipient, so as to enable service recipient to perform such services independently by utilizing the technical know-how, knowledge, skill, etc acquired from the assessee. AO has alleged that the assessee has failed to furnish necessary details/documents, however, he has not elaborated what were the informations required from the assessee. Unfortunately, Ld. DRP has mechanically endorsed the view of the AO without examining the issue both factually and legally with proper application of mind. Since, the Departmental Authorities have failed to demonstrate that the make available condition enshrined in Article 12(4)(b) of the tax treaty is satisfied, we are unable to sustain the addition as FTS/FIS. Accordingly, the Assessing Officer is directed to delete the addition. Addition of an amount received from AU Small Finance Bank Ltd. towards sale of software as FTS - Schedule C provides for the license fee for first 10,00,000 users. Even, the invoice raised by the assessee on AU Small Finance Bank Limited clearly shows the sale of mobile application license fee. Thus, it is explicit from the license agreement that what the assessee has sold are software licences and not any services. Therefore, in the first place, the Departmental Authorities have committed error in treating the receipts from the sale of software as FTS. Keeping in perspective the facts available on record, it would have been understandable had the Departmental Authorities taxed the receipts as royalty, which of course, can be a debatable issue in view of ratio laid down in the case of Engineering Analysis Centre of Excellence (P.) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] - However, one need not go into that aspect as the singular case of the Departmental authorities is that the receipts are in the nature of FTS, which findings. in our view, is contrary to the facts and material available on record, hence, totally unacceptable. Accordingly, we hold that the amount in dispute is not taxable as FTS. The Assessing Officer is directed to delete the addition. This ground of the assessee is allowed. Case-Laws Income Tax Wed, 17 Jan 2024 00:00:00 +0530