AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1391
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....ecord. The assessee is a foreign company incorporated under the laws of Netherlands, engaged in the business of providing enterprise cloud computing solutions that define structure, manage and automate services for global enterprises. The company submitted its Tax Residency Certificate (TRC) issued by the Netherlands Tax Authorities. The assessee had filed its revised return of income for the Asst Year 2019-20 on 30.11.2020 declaring total income of Rs 125,75,01,160/- and claimed exemption on the entire income based on India Netherlands Double Taxation Avoidance Agreement (DTAA). During the year under consideration, the assessee has rendered subscription , professional and training services to various customers in India from which it has earned income of Rs 125,11,22,698/-. 3.1. The income from subscription services is for use of software applications (offerings) i.e. Software as a Service . There is no transfer of all or any rights in respect of, or the use of or the rights to use underlying copyrights of such software application to the customers. Accordingly, it was pleaded that such software services do not fall within the definition of 'royalty' as per Article 12(4) of India ....
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.... any IPR of its customers. A customer only gains access to use the copyrighted software applications of the assessee and has no access / rights in the copyright so created. Hence it was pleaded that the impugned receipts are in the nature of payments received for the sale of software and squarely fall within the ratio decidendi of the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs CIT in Civil Appeal Nos. 8733 -8734 of 2018 and hence is neither liable to tax under the provisions of the Act or under the India Netherlands DTAA. 4. The ld./ AO concluded that the receipts in question are services of a technical nature and hence taxable as FTS. 5. It was submitted ServiceNow Software Development India Private Limited is an Associated Enterprise (AE) of the assessee and works on a cost-plus model wherein it provides support services to the assessee. It was clarified that the disputed receipts have no bearing whatsoever on the payments made by the assessee to its AE. 5.1. The entire understanding of the ld. AO in terms of the business model and the nature of services rendered in India is based on information available o....
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.... thus, may be taxed in India. However, the second sentence in Article 12(5) of India Finland DTAA qualifies the first sentence and states that where FTS relates to services performed in Finland, then such FTS shall be deemed to arise in Finland and accordingly, shall be taxable in Finland and shall not be taxable in India. Accordingly, it was submitted that where fees relate to services performed in Finland, the second sentence in Article 12(5) of India Finland DTAA would override the first sentence and thus the income from such services shall be deemed to arise in Finland only. 5.5. The assessee submitted that in the instant case, the services were provided by the company in Netherlands. Accordingly, in terms of Article 12 of India Netherlands DTAA (as modified by the MFN clause present in the Protocol forming part of the DTAA read with Article 12 of India Finland DTAA) , the amount received by the company from its customers in India for provision of such services shall be deemed to arise in Netherlands and thus, should not be taxed in India. 6. The ld. DRP observed that the assessee had stated that since the subscription services were offered from Netherlands, it was not taxabl....
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....cluding Configurable Elements and APIs, but excluding Ancillary Software. 2. PARTNERNOW OVERVIEW 2.1. Enrollment in PartnerNow. PartnerNow consists of Programs, including the Sales Partner Program and Services Partner Program, described in the applicable Program Terms and Guides. Participant shall be deemed enrolled in PartnerNow, subject to the terms of this Agreement, when it is initially appointed to one or more Programs as evidenced by an Appointment Confirmation. 2.3. Benefits. Upon appointment to a Program, Participant may access certain ServiceNow Technology, including one or more Partner Instances, all subject to and in accordance with the Licenses and use authorizations granted under Section 4 (Licenses to Participant) below and the other terms and conditions of this Agreement. 4. LICENSES TO PARTICIPANT. Subject to the limitations set forth below in Section 4.7 (Certain Limitations) , the other terms conditions of this Agreement and the applicable Program Terms, ServiceNow hereby grants to Participant the following licenses and use authorizations with respect to ServiceNow Technology upon Participant's acceptance into any PartnerNow Progam: 4.1. Partner Ins....
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....s and packaged professional services as provided in the Guide. 8. We find that this is no different than a copyrighted article. The revenue had all along been treating the same as Royalty and during the year under consideration, the same is sought to be treated as Fee for Technical Services (FTS). 7. It would be pertinent to examine the FTS clause in Article 12 of India Netherlands Treaty which reads as under:- ARTICLE 12 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1........ 2[2....... 3. ....... 1[4........... 5. For purposes of this Article, "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received; or (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. 6 to 9. ....... 7.1. We find that Ar....
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....xplained the meaning of the word 'make available'. According to the aforesaid definition fees for technical service means payments of any kind to any person in consideration for services of technical nature if such services make available technical knowledge, experience, skill, know how or processes, which enables the person acquiring the service to apply technology contained therein. Though this provision is not contained in India Netherlands Treaty, by virtue of Protocol in the agreement, Clause (iv) (2) reads as under:- "If after the signature of this convention under any Convention or Agreement between India and third State which is a member of the OECD India should limit its taxation at source on dividends, interests, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of income, then as from the date on which the relevant Indian Convention or Agreement enters into force the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention." 14. Therefore the....