TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 163
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....laiming the same as exempt in its return of income. The case of the assessee was selected under "CASS" and notice under section 143(2) of the Income Tax Act, 1961 dated 31.05.2023 was issued electronically through ITBA portal. Subsequently, notices u/s 142(1) of the Act, were issued to the assessee from time to time. The submissions of the assessee were perused and considered by the AO and a show cause notice dated 13.02.2024 was issued to the assessee to which the assessee submitted response on 20.02.2024 which was perused but not found tenable by the AO. The AO noted that the assessee had shown total receipt of Rs. 4,96,87,808/- which included Rs. 4,69,04,308/- on account of rendering services pertaining to supply of software licence and support and maintenance services amounting to Rs. 27,83,500/- to Reliance Jio Infocomm Limited (RJIL). The AO further noted that claim of the assessee that this amount was not taxable in India as the underlying services do not fall within the purview of Royalty/Fee for Technical Services' under Article 12 read with sec 90(2) of the India-USA Double Tax Avoidance Agreement ('DTAA') and therefore shall qualify as business income of the ....
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....FTS taxable @ 10% as per Article-12 of India USA DTAA in the draft assessment order u/s 144C (1) of the Act served on the assessee on 08.03.2024. 2.5. Aggrieved with the said draft assessment order, the assessee filed its objections before ld. DRP. DRP's finding and direction 2.6. The DRP noted that the software license services provided by the assessee to the Indian entity i.e. JIO were long term services with license/sub-license given in perpetuity and that the agreement required the service provider to provide an upgraded version to JIO in a timely manner. The DRP further noted that it was pertinent to mention that software provided by assessee was a highly specialized software that specifically only caters to telecom operators and any process modification, bug fixation, trouble-shooting, warranty services etc. were also to be provided by the assessee to JIO. In view of the facts, the Panel held that the services rendered by the assessee can be categorised as a process rather than sale of a product like literary work, piece of art, musical score etc. because of the inherent and intrinsic nature of assessee's software product, being a bouquet of services such as main....
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.... 6. That both the Ld. AO and Hon'ble DRP have erred in law and on facts, in not appreciating that the support and maintenance services being ancillary and subsidiary as well as inextricably and essentially linked to software license does not amount to Fees for included Services as per Article 12(5)(a) of the India - USA DTAA 7. That the Ld AO has erred on facts and in law, in making an addition of INR 4,96,87,808 by treating the transactions of both supply of software as well as support and maintenance services as Fees for Technical Services / Fee for included Services under Article 12 of the India - USA of the DTAA without establishing satisfaction of make available test present in the said Article 8 That both the Ld. AO and Hon'ble DRP have erred on facts and in law, in treating the amount received by the Appellant towards support and maintenance services (being, INR 27,83,500), as Fees for Technical Services / Fee for Included Services without providing for any basis for satisfaction of make available test provided under Article 12 of the DTAA 9. That both the Ld. AO and Hon'ble DRP have erred on facts and in law, in not following th....
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....ors across the Globe. It has no business connection or Permanent Establishment ("PE") in India. Being a tax-resident of USA and a non-resident for the purposes of Act in India it is entitled to the beneficial provisions of the Double Taxation Avoidance Agreement between India and USA ("India-USA DTAA"). On 20.02.2017 the assessee entered into a Software Licensing Agreement with Reliance Jio Infocomm Ltd. ("RJIL/Reliance/Jio") and a Service Level Agreement by way of an Annexure (Annexure F) to the Software License Agreement for providing annual maintenance and support services pursuant to which the assessee received software licensing income and Annual Maintenance Contract ("AMC") service income during the relevant AY under consideration. The assessee filed its return of income for AY 2019-20 on 11.11.2019 declaring total income at Rs. 4,94,29,858/- on account of rendering services pertaining to supply of software licence amounting to Rs. 4,35,39,550/- and support and maintenance services amounting to Rs. 58,90,308/- to RJIL. The assessee claimed these receipts as non-taxable in India and claimed credit of TDS/refund of Rs. 52,62,769/- on account of tax deducted at source by its cus....
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....tating that the Ld. DRP has rejected the objections raised by the assessee and thereby making the addition of Rs. 4,94,29,858/- treating the entire receipts as FTS/FIS @ 10% as per Article 12 of the India-USA DTAA. xxxxxxxxxxxxx 7. We have heard the Ld. Representative of the parties and perused the material on records. It is an undisputed fact that during the relevant AY, the assessee is a tax resident of USA and has opted to be governed by the provisions of India-USA DTAA. Also, the assessee does not have a PE in India. The assessee had entered into a Software Licensing Agreement for supply and license certain Software and Service Level Agreement (forming part of Software Licence Agreement) to provide AMC services to Reliance/Jio/ RJIL. During the relevant AY, the assessee received software licensing fee of Rs. 4,35,39,550/- and AMC charges of Rs. 58,90,308/-aggregating to Rs. 4,94,29,858/-. So far as the issue relating to the taxability of Software Licensing Fee of Rs. 4,35,39,550/- is concerned, we observe that the Ld. DRP has examined this issue in detail and recorded its observation finding in para 2.5 of its order reproduced below:- "2.5 As regards the fi....
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....eration received towards licensing of software is for use of a copyrighted article and therefore not taxable as royalty income under the provisions of Article 12 of the India-USA DAA. In our considered view, the case of the assessee is squarely covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) which has already been upheld by the Ld. DRP and the Hon'ble Delhi High Court in light of the factual matrix of the present case. We, therefore have no reason to interfere with the findings of the Ld. DRP on the impugned issue. Consequently, consideration of Rs. 4,35,39,550/- received by the assessee from supply of software licence is not taxable in India in terms of Article 7 of the India-USA DTAA. Accordingly, ground no.1 to 4 is allowed with a direction to the ld. AO to give effect to the ld. DRP's findings in its directions/order dated 17.05.2022. Xxxxxxxxxxxxx 10. Now coming to the remaining receipts of Rs. 58,90,308/- on account of support and maintenance services rendered by the assessee, the Ld. AO as well as the Ld. DRP has treated the impugned receipts taxable as FTS/FIS in India ----xxxxx....
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....ternative plea taken by the assessee. In our view, even the test of 'make available' under Article 12(4)(b) of the India-USA DTAA is not satisfied given the facts of the present case. Maintenance services comprise of troubleshooting, software updates, patches etc. and technical support by e-mail, fax etc. and the training services are for acquainting with the operation / use of software. These activities, in our view, do not qualify as 'make available' within the meaning of the expression contained in Article 12(4)(b) of the India-USA DTAA. The meaning of the expression 'make available' has been derived from umpteen numbers of judicial precedents as well as Protocol to the India-USA DTAA. If we consider the terms of the AMC under the Software Licence Agreement (read with Service Level Agreement) set out above, we find that none of the conditions to qualify the test of 'make available' has been satisfied in the present case as - (i) the service recipient is not able to apply any expertise/ technology contained therein or use knowledge on its own without recourse to the service provider; (ii) the service recipient is not at the liberty to use the technical knowledge, skill, know-how ....