Tech Data (Singapore) Private Limited Vs DCIT (ITAT Mumbai)
The assessee filed an appeal against the assessment order dated 19 July 2022 passed under Sections 143(3) read with 144C(13) of the Income-tax Act, 1961 for Assessment Year 2019-20. The appeal raised five grounds relating to the validity of the assessment notice under Section 143(2), taxability of income from sale/distribution of off-the-shelf software, treatment of management fees as Fees for Technical Services (FTS) under the Income-tax Act and Article 12 of the India-Singapore Double Taxation Avoidance Agreement (DTAA), levy of interest under Sections 234A and 234B, and initiation of penalty proceedings under Sections 274 read with 270A.
The assessee, a tax resident of Singapore, was engaged in providing management services and in the sale of software and information technology products to its Indian associated enterprise and third-party customers. During assessment proceedings, the Assessing Officer questioned whether receipts from India were taxable as royalty or FTS. The assessee submitted that it purchased off-the-shelf software in bulk in Singapore and sold it to its Indian distributor, who in turn sold it to authorised resellers. It stated that although it had originally offered income from software sales as royalty in its return, after the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT, it realised that such receipts should be treated as business income. The assessee relied on the distribution agreement with the software developer and contended that it was merely a non-exclusive distributor without any transfer of copyright.
