Facts of the Case

The Revenue filed appeals under Section 260A of the Income-tax Act challenging a common order dated 10.10.2023 passed by the Income Tax Appellate Tribunal in respect of Assessment Years 2011-12 to 2014-15. The assessments were framed under Section 143(3) read with Section 144C. The Tribunal deleted additions made by the Assessing Officer by holding that certain receipts of the assessee, DXC Technology Services Singapore Pte. Ltd., were not taxable in India as royalty or fees for technical services under the India–Singapore Double Taxation Avoidance Agreement.

Issues Involved

Whether consideration received from sale of off-the-shelf software constituted royalty, whether receipts for use of telecom bandwidth facilities were taxable as royalty or fees for technical services, and whether receipts from providing information technology related support services were taxable as fees for technical services under Article 12 of the India–Singapore DTAA.

Petitioner’s Arguments

The Revenue contended that the Tribunal erred in holding that receipts from sale of software, bandwidth usage and IT support services were not taxable in India. It was argued that such receipts fell within the expanded definition of royalty and fees for technical services under domestic law and should be taxed accordingly.

 

 

 

 Respondent’s Arguments

The assessee submitted that there was no transfer of copyright in respect of off-the-shelf software and therefore the receipts could not be treated as royalty under Article 12(3) of the DTAA. It was argued that amendments to Section 9(1)(vi) of the Act could not be automatically imported into treaty provisions. In respect of bandwidth and IT support services, it was contended that no technical knowledge or skill was made available to the customers, and therefore the receipts did not qualify as fees for technical services under Article 12(4) of the DTAA.

Court Order / Findings

The Delhi High Court held that the issue relating to off-the-shelf software was squarely covered against the Revenue by its earlier decision for AY 2009-10 and by the Supreme Court judgment in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT. The Court observed that the Tribunal had correctly held that absence of copyright transfer precluded taxation as royalty. With respect to bandwidth charges, the Court noted that the Tribunal followed earlier coordinate bench decisions, including Planetcast International Pvt. Ltd., and that the Revenue had not shown any contrary material. As regards IT support services, the Court held that the Tribunal rightly applied the “make available” test under Article 12(4)(b) of the DTAA and followed Planetcast International, which had already been upheld by the Delhi High Court. The Court concluded that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that amendments to domestic tax law expanding the scope of royalty or fees for technical services cannot be read into treaty provisions unless the treaty itself is correspondingly amended. Further, for taxation as fees for technical services under the India–Singapore DTAA, the “make available” condition must be satisfied.

Final Outcome

All appeals filed by the Revenue were dismissed. The order of the Income Tax Appellate Tribunal deleting additions on account of software sales, bandwidth charges and IT support services was upheld, and the receipts were held not taxable as royalty or fees for technical services under the India–Singapore DTAA.

Link to Download order- https://mytaxexpert.co.in/uploads/1769502795_COMMISSIONEROFINCOMETAXINTERNATIONALTAXATION1DELHIVsDXCTECHNOLOGYSERVICESSINGAPOREPTELTD.EARLIERKNOWNASHPSERVICESSINGAPOREPTELTD..pdf

 

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