Case Law Details
SoftwareONE Pte. Ltd. Vs ACIT (ITAT Delhi)
Introduction: This case involves appeals filed by the assessee challenging final assessment orders under sections 143(3) and 144C(13) of the Income-tax Act, 1961, for the assessment years 2018-19 and 2019-20. The primary dispute in these appeals pertains to the taxability of amounts received from the sale of software as fees for technical services (FTS) under Article 12(4) of the India-Singapore Double Taxation Avoidance Agreement (DTAA).
Detailed Analysis: The assessee, a non-resident corporate entity incorporated under the laws of Singapore and a tax resident of Singapore, primarily operates as a software distributor. It also generates income from support services. During the assessment years in question, the assessee earned income from the sale of software and the provision of support services.
While the income from support services was declared as FTS income and offered for taxation in India, the income from the sale of software was not taxed. The rationale behind this was that it did not qualify as royalty. During the assessment proceedings, the Assessing Officer requested various details related to the software sale receipts. After reviewing the provided information and conducting research, the Assessing Officer concluded that the receipts from the sale of software were essentially payments for technical services, making them eligible for taxation as FTS. This classification was supported by both the Income-tax Act and Article 12(4)(b) of the India-Singapore DTAA.
Furthermore, the Assessing Officer alleged that the assessee had not supplied copies of relevant contracts under which the sales to Indian customers were conducted and had only furnished sample invoices. Consequently, the Assessing Officer reached the conclusion that the sale of software included services of a technical nature, qualifying the receipts as FTS. The draft assessment order reflected these findings.
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