AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 31
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....al business purposes; and ii. through BPO partner wherein it grants non-exclusive, non-transferable and non-sublicensable right to the BPO partner to resell the automated services to end-users in India. b. The Company also provides (i) certain implementation services to get the customer on boarded for the purpose of provision of Cloud-based services; and (ii) user trainings to enable the end-user access the Subscribed services. c. The Cloud-based service automates finance and accounting requirements of the subscribers to the services. Such services are completely automated and do not involve human intervention in the provision of such services. i. Such Cloud-based services include service products viz., Finance transformation, Reconciliation Management, Ondemand Professional and Close Process Management etc. which are standard products of the Company, the provision of which is fully automated. ii. The Software on cloud under SaaS model is a standard facility provided by the Company at a pre-defined tariff rate, on a non-exclusive basis, to its customers/end users. iii. The ownership of the data that is input by the subscriber continues to vest in the subscriber/enduser/....
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.... provision of Cloud-based services. Once provision of implementation services is completed, the Hosted Services (i.e., the Cloud-based Software) are deployed for the customer which functions automatically without any human intervention. e. The Company provides on-demand recorded trainings or periodic live web- based training sessions to enable usage of Cloud-based services by the end-user customer. Such User trainings help the end-users access the Subscribed Cloud- based services and view the automated reports. Time is generally spent in explaining the end-user on how to generate reports from the Cloud-based service without a technical content therein. i. The provision of User training does not require any expertise in technology and merely involves procedural/operational training relating to use of the services. ii. The training is operational in nature and does not involve any technical knowledge relating to Software but merely trains the users on how to access the Subscribed service and view the reports. iii. The trainings do not involve any technical content which could be considered as technical training. 4. The AO issued notices u/s 133(6) of the Income Tax Act, 1961....
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....nd-users in India. b. The Company also provides (i) certain implementation services to get the customer onboarded for the purpose of provision of Cloudbased services; and (ii) user trainings to enable the end-user access the Subscribed services. (ii) Cloud-based services The Cloud-based services automates finance and accounting requirements of the subscribers to the services. Such services are completely automated and do not involve human intervention in the provision of such services. Such Cloud-based services include service products viz., Finance transformation, Reconciliation Management, On-demand Professional and Close Process Management etc. which are standard products of the Company, the provision of which is fully automated. The Software on cloud under SaaS model is a standard facility provided by the Company at a pre-defined tariff rate, on a nonexclusive basis, to its customers/end-users. The ownership of the data that is input by the subscriber continues to vest in the subscriber/end-user/customer. The customer has the ability to access the reports automatically generated by the Software and no rights in the copyright of the Software, provided on cloud, is gr....
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....vices. Once provision of implementation services is completed, the Hosted Services (ie., the Cloud- based Software) are deployed for the customer which functions automatically without any human intervention. (iv) User Training The Company provides on-demand recorded trainings or periodic live web- based training sessions to enable usage of Cloud-based services by the end user customer. Such User trainings help the end users access the Subscribed Cloud- based services and view the automated reports. Time is generally spent in explaining the enduser on how to generate reports from the Cloud-based service without a technical content therein. The provision of User training does not require any expertise in technology and merely involves procedural/operational training relating to use of the services. The training is operational in nature and does not involve any technical knowledge relating to Software but merely trains the users on how to access the Subscribed service and view the reports. The trainings do not involve any technical content which could be considered as technical training. A gist of the solutions provided by BiackLine and activities carried out during implem....
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....rendered by the Company. (Reference is made to Para No. 3 on Page No. 15 of the Draft Order) Company's submission - The subscription fee towards the Software provided on cloud is not based on the time spent as there is no time spent in provision of Cloud-based services. The Software subscription fee is actually based on the number of users subscribed for and has no relation whatsoever to the time spent by the Company's personnel in provision of implementation service-relevant snapshots of the invoices raised by the Company with respect to Cloud-based services is captured below:..................... Thus, the Company humbly submits that the Learned AO has erred in concluding the below, basis incorrect linking of responses submitted by Cipla to the receipts from Cloud-based Software subscription earned by the Company: Cloud-based Software subscription (i.e., Cloud-based service) is not a standard facility Human element is involved. The fee charged for Cloud-based Software subscription is basis the time spent by the Company personnel." 4.2 During the assessment proceedings, the AO had sent notices under section 133 (6) of the Act to one of the vendors M/s CIPLA LTD. wh....
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....n of Make available clause. In view of the above discussion, it is established that Human Element and Make available assessee company has used it to personnel for providing these services and has provided training to the personnel of its clients (as stated by CIPLA and seen from invoices of Infosys). Thus make available is satisfied in this case. In this case assessee has also provided consultancy services 4.3 It is also clear from the nature of service rendered by the assessee to CIPLA that at every stage there was a personnel from M/s Blackline Systems Inc involved in imparting the operational training and how to use the software, thus providing the make available of the software. 4.4 The nature of services provided by the assessee are customized, individualized and differentiated in its services to the customer. The service rendered includes capability to mimicking human ability, and human intelligence. Assessee also provides ongoing technical support and on demand professional support to the vendors. Such services are purely technical in nature and as per the source rule under Section 5(2), 9(1)(vii) of the Act read with Article 12(4) of India USA DTAA partakes the nature....
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....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 3 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. 14. Further, as per the above definition, FIS means payment for technical or consultancy services which additionally satisfy the conditions specified under clause (b). In view of the conditions as per clause (b), as per the India-US DTAA, FIS means any payment for technical or consultancy services which make available technical knowledge, skill, know-how or process. Meaning of 'make available' 15. The meaning of the term make available has been explained as per the Memorandum of Understanding of the India-USA DTAA concerning FIS in Article 12 ('MOU'). "Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the s....
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....text that we have to examine the scope of expression 'make available'." 18. Basis the above, it can be held that the assessee do not "make available" any technical knowledge, experience, skill, know-how or processes to group companies which may enable them to apply any technology contained therein without recourse to the Appellant. 19. We have considered as to whether the receipts can be considered as royalty as per Article 12 India-US DTAA has also been examined. 20. We find that the facts of the assessee are covered by the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Private Limited vs. CIT (CA Nos. 8733-8734 of 2018), the Hon'ble Supreme Court, after determining various clauses of EULA/ Distribution agreement held that payments made by the Appellant to non-resident vendors shall not be taxable as Royalty under the relevant DTAA, the relevant extract of decision is as under: "Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distr....