Subscription, professional and training services doesn’t qualify as FTS under India-Netherland DTAA

Service Now Nederland BV Vs ACIT (ITAT Delhi)

ITAT Delhi held that income from subscription, professional and training services for use of software doesn’t fall within the definition of Fees for Technical Services (FTS) under India-Netherlands DTAA and hence cannot be taxed in India.

Facts- The assessee is a foreign company incorporated under the laws of the Netherlands, engaged in the business of providing enterprise cloud computing solutions that define structure, manage and automate services for global enterprises. The company submitted its Tax Residency Certificate (TRC) issued by the Netherlands Tax Authorities.

During the year under consideration, the assessee has rendered subscription  professional and training services to various customers in India from which it has earned income of Rs 125,11,22,698/-.

As per the assessee, the income from subscription services doesn’t fall within the definition of ‘royalty’ as per Article 12(4) of India – Netherlands DTAA and also doesn’t fall within the definition of ‘fees for technical services’ as per Article 12(5) of India – Netherlands DTAA. AO concluded that the receipts in question are services of a technical nature and hence taxable as FTS. DRP upheld the action of AO. Being aggrieved, the present appeal is filed.

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