Forcepoint International Technology Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that cybersecurity software sale doesn’t not amount to rendering of technical service and hence the same is not taxable as Fees for Technical Services [FTS] under Article 12 of the India-Ireland DTAA and hence not taxable.
Facts-
The assessee company Forcepoint International Technology Limited, Ireland [erstwhile Websense International Technology Limited (WITL)] is an overseas Company. It does not have permanent establishment in India. The present appeal has been filed against the order of CIT(A). The sum and substance of the grievance of the assessee is as to whether sale of software constitutes fess for technical services or not.
Conclusion-
Held that to fall within the scope of FTS, it is incumbent upon the Revenue to establish an indelible link between the payment received by the assessee and the same constituting consideration for providing technical services which the Revenue has not done. We are of the considered view that the Revenue has not shown that based on the agreement or the invoices, read with details of product portfolio, that software has not been sold and that technical services were rendered in the nature of FTS. We further find that the Revenue’s proposition arose from the fact that the offering by way cyber security protection, the software provided a comprehensive service experience or solution with the help of technology embedded in the security software and therefore there is a rendering of technical service and hence FTS. Such a proposition, we hold are not valid. We are of the view that the assessee supplied a software product which facilitated digital security in a user’s technology infrastructure and which was delivered on the cloud. The payment received by assessee from Distributor was for acquiring security software simpliciter for onward selling to end customer. We, therefore, hold that the assessee company is not liable to be taxed on its income earned from sale of software to the Indian Distributor as FTS. Accordingly, we allow the grounds raised by the assessee.
