AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 1195
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....e to be decided in this appeal is as to whether the ld AO was justified in taxing the receipts of Rs 10,89,13,249/- as Fee for Technical Services (FTS) in the facts and circumstances of the instant case. 4. We have heard the rival submissions and perused the materials available on record. DigiCert, Inc. (hereinafter referred to as 'DigiCert, Inc.' or 'the assessee or 'the Company') was incorporated on 10 April 2003. The Company is a USA technology based global company focused on digital security. The Company provides public key infrastructure and validation required for issuing digital certificates or TLS/SSL certificates. These certificates are used to verify and authenticate the identities of organizations and domains and to protect the privacy and data integrity of user's digital interactions with web browsers, email clients, documents, software programs, apps, networks and connected loT devices. The total receipts earned by the Company during the captioned Assessment Year ('AY') 2021- 22 through operations in India amounts to INR 10,89,13,249. The assessee filed its return of income on 11 March 2022 and since the income earned by the assessee ....
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....eb Technologies Private Limited MUMA46144A 4,78,20,187 Yes 13 BFC Forex ft Financial Services Pvt Ltd MUM B17091E 34,027 Yes 14 Ge Oil ft Gas India Private Limited MUMG10927A 1,48,967 Yes 15 NCDEX E Markets Limited MUMN14313F 56,534 Yes Total 10,89,13,249 7. Out of the above receipts, 99.16% of the receipts were from JNR Management Resources Pvt Ltd, Adweb Technologies Pvt Ltd and Safe Cyber Solutions & Services Pvt Ltd, which are governed by Master Reseller Agreement enclosed in Pages 1038 to 1047 of Vol. III of the Paper Book. The relevant clauses of the said agreement are reproduced below for the sake of convenience:- "This Master Reseller Agreement (the "Agreement") is between DigiCert, Inc. ("DigiCert) and greentity or business reselling Services meester executing an Addendum that references this Agreement, by electronically accepting this Agreement via DigiCert's online services, or by reselling Services, Reseller hereby accepts this Agreement. If you are an individual or individuals entering into this Agreement on behalf of Reseller, you represent and warrant that you are authorized represe....
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.... and DigiCert. 2. APPOINTMENT Subject to the terms and conditions of this Agreement, DigiCert hereby appoints Reseller as a non-exclusive reseller for the Services. Reseller may promote, market, and resell Services to end user customers (each such customer to whom Reseller resells Services, the "Reseller Customers") in the Territory. 3. RESELLER OBLIGATIONS 3.1 Resale Process. 3.1.1 Reseller may purchase Services for resale to Reseller Customers. If Reseller wishes to enroll for Services on behalf of Reseller Customers, Reseller shall enter into an agreement with such Reseller Customers (each, a "Customer Agreement"), which (a) binds the Reseller Customers to the Subscriber Agreement applicable to the Services, as specified by DigiCert and published at https://www.digicert.com/subscriber-agreement; and (b) provides that DigiCert is an express third-party beneficiary of the obligations contained in the Customer Agreement. Reseller shall use best efforts to ensure that all Customers abide by the terms of the applicable Customer Agreement(s). DigiCert may modify such terms by updating its repository from time to time and Reseller shall flow....
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....rvices. Reseller shall be responsible for being knowledgeable about the Services, including the technical aspects and language related thereto, and Reseller shall cause Reseller appropriate employees to participate in any technical, sales and service training with respect to the Services as required by DigiCert from time to time. 3.3 Support 3.3.1 First-Tier Support. Reseller shall provide Reseller Customers with first-tier support including, but not limited to, resolution of pre-sales questions, setup, onboarding, integration, and post-sale inquiries, basic integration support, problem screening, and basic diagnostics. 3.3.2 Renewal. Reseller shall use commercially reasonable efforts to send renewal notices to Reseller Customers at least thirty (30) days prior to expiry of the applicable Services. 3.3.3 Revocation. If Reseller Customers request that Reseller revoke its Certificates, then Reseller shall forward such request to DigiCert on behalf of Reseller Customers. If Reseller becomes aware that Reseller Customers' organizational information used to authenticate and verify Reseller Customers' Certificates has changed or that Reseller C....
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....hen DigiCert shall email deployment Reseller enrolls for Se Digicert's authentication of the applicable Certificate Application. Alternatively, if Reseller Reseller upon DigiCservices through DigiCert's URL, then DigiCert shall email deployment instructions director Reseller Customers upon DigiCert's authentication of the applicable Certificate Application. 4.2 Service Notices. DigiCert shall use commercially reasonable efforts to notify Reseller and/or Reseller Customers of the expiration of any Services at least thirty (30) days prior to the expiration. 4.3 Support. DigiCert shall provide support as follows: (a) standard phone and email support during normal business hours Monday through Friday exchange signated holidays), (b) within twenty-four (24) hours of receipt of a technical inquiry fronting Digited to the Services, a response addressing the issue; (c) twenty-four (24) hour access to support pages on DigiCert's website; and (d) at DigiCert's discretion, assign an account manager or the equivalent portages on DigiCert sketing support. For the avoidance of doubt, Reseller is solely responsible for providing billing port and Reseller Cust....
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....-exclusive, non-transferable, non-sub-licensable right and license during the term of this agreement to (a) use the DigiCert materials during the term of this agreement solely in conjunction with the marketing, promotion and resale of the services and (b) modify certain DigiCert materials expressly designated for such purpose by incorporating reseller trademarks and/or brand features which is nothing but the reseller branding in a manner consistent with DigiCert brand guidelines. 9. Similarly, in respect of Master Supplier Agreement entered into with DXC Technology India Private Limited, which is enclosed in pages 632 to 666 of Vol. II of the Paper Book, the relevant clause number 5 under the caption "Licenses to Materials" also contain the same clause. Further, the relevant clause under the caption "Certificate License" entered with the other Indian customers through the Digital Certificate Subscriber Agreement enclosed in pages 850 to 859 and 1005 to 1014 of Vol. III of the paper book also contain a clause which states that DigiCert grants applicant a revocable, non-exclusive, non-transferable license to use, for the benefit of the subject, each issued certificate in connectio....
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....e Paper Book. The assessee had also furnished the invoices raised on JNR management resources private limited which are enclosed in pages 518 to 522 of Vol. II of the Paper Book which clearly says what is being charged by the assessee is for reseller bulk digital certificate purchase. These invoices clearly show that no technical services within the ambit of fee for technical services both as per the Act as well as under the treaty were rendered by the assessee. Similarly, the assessee had enclosed the invoices from pages 535 to 547 of Vol. II of the Paper Book in respect of Adweb Technologies private limited whose invoices also carry the same description as that of JNR above. 12. We find that SSC had rendered level 1 services to the Indian customers and level 2 services were provided by Indian AE. In our considered opinion, the learned AO had mixed both these services together and categorized the receipts of the assessee as FTS. Infact, the assessee vide reply letter dated 15-12-22 enclosed in Pages 673 to 675 of Vol. II of the Paper Book had categorically stated that DigiCert India provides level 2 technical support services. The level 1 support comprise of addressing network ....
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....g on the particular clause of the agreement with DXC Technology India Private Limited would be grossly unjustified. Now, even if the relevant clause mentioned in DXC Technology agreement could be construed as technical services so as to make it taxable under the Act, the same whether would become taxable as per Article 12 of India US treaty is to be seen. In this regard, Article 12 of India US treaty defines fee for technical services and it insists that unless the technical services rendered result in "making available" technological support, technology, technical plan or design etc., only then the said services could be construed as fee for technical services so as to be taxable under the India US treaty. In the instant case, nowhere the lower authorities could bring with cogent evidence on record that the "make available clause" is duly satisfied so as to enable the end user to use the technology on his own. Hence the said services could not be construed as FTS as per Article 12(4)(b) of India US treaty. 15. Now coming to the next aspect of the issue in dispute is that the learned DRP and the learned Assessing Officer had contended that the assessee had split its revenue into....