Facts of the Case

The appellant, Tungsten Automation England Limited, a company incorporated and tax resident of the United Kingdom, was engaged in providing electronic invoicing services through its proprietary cloud-based platform. The appellant had granted a non-exclusive licence to Genpact entities for use of its e-invoicing platform in respect of overseas end customers. The appellant did not file returns of income in India for Assessment Years 2016–17 and 2017–18 on the ground that it had no taxable income in India and no permanent establishment. The Assessing Officer initiated reassessment proceedings based on information that payments had been received from Genpact India Private Limited and concluded that such receipts were taxable in India. Draft assessment orders treated the receipts as fees for technical services under Section 9(1)(vii) of the Income Tax Act and Article 13 of the India–UK DTAA. The Dispute Resolution Panel upheld the view, and the final assessment orders were affirmed by the Income Tax Appellate Tribunal.

Issues Involved

Whether the amounts received by the UK entity for providing access to and use of its e-invoicing platform constituted fees for technical services under Article 13(4)(c) of the India–UK DTAA, whether the “make available” condition was satisfied, and whether business receipts could be recharacterised as fees for technical services in the absence of transfer of technical knowledge or skill.

Petitioner’s Arguments

The appellant contended that the receipts were business income arising from provision of automated cloud-based services and that no technical knowledge, skill, know-how, process, or technical design was made available to the Indian entity. It was argued that Genpact merely used the platform and did not acquire any capability to independently apply or replicate the underlying technology. In the absence of a permanent establishment in India, the receipts were not taxable under the Income Tax Act or the India–UK DTAA.

Respondent’s Arguments

The Revenue argued that the services rendered were technical in nature and involved sophisticated technology, and therefore the consideration received qualified as fees for technical services under Explanation 2 to Section 9(1)(vii) of the Act and Article 13(4)(c) of the India–UK DTAA. It was contended that the services enabled Genpact to provide e-invoicing solutions to its customers and thus satisfied the “make available” requirement.

Court Order / Findings

The Delhi High Court held that the definition of fees for technical services under the India–UK DTAA is narrower than under the Income Tax Act and that the treaty definition would prevail. The Court examined the contractual arrangements and the nature of services rendered and found that the appellant merely provided access to its cloud-based platform without transferring any technical knowledge, skill, know-how, or process. Applying the settled “make available” test laid down in decisions such as De Beers India Minerals, Guy Carpenter, Bio-Rad Laboratories, RELX Inc., and IMG UK, the Court held that the services did not enable the recipient to independently apply the technology in future. The Court concluded that the receipts could not be characterised as fees for technical services under Article 13 of the India–UK DTAA.

Important Clarification

The Court clarified that mere rendering of services using advanced technology or sophisticated infrastructure does not by itself satisfy the “make available” condition. For taxation as fees for technical services under the DTAA, there must be a clear transfer of technical knowledge or skill enabling the recipient to deploy such technology independently without recourse to the service provider.

Final Outcome

The appeals were allowed. The orders passed by the Income Tax Appellate Tribunal, Dispute Resolution Panel, and the Assessing Officer treating the receipts as fees for technical services were set aside. It was held that the amounts received by the appellant from Genpact entities were not taxable in India as fees for technical services under the India–UK DTAA, and no substantial question of law survived in favour of the Revenue.

 Link to Download Order https://www.mytaxexpert.co.in/uploads/1769497957_TUNGSTENAUTOMATIONENGLANDLIMITEDFORMERLYKNOWNASTUNGSTENNETWORKLIMITEDVsDEPUTYCOMMISSIONEROFINCOMETAXINTERNATIONALTAXATIONCIRCLE311NEWDELHI.pdf

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