Case Law Details
Microstrategy Singapore Pte Limited Vs DCIT (ITAT Delhi)
Insofar as the issue of treating the amount received towards provisions of software related services as FTS, we have noticed that the Assessing Officer has not brought any cogent material on record to demonstrate that while providing the software related maintenance service, the assessee has made available any technical knowledge, knowhow, skill etc. so as to enable the recipient of such service to use it independently in exclusion of the assessee. Therefore, in our considered opinion, the conditions of Article 12(4)(b) of the Treaty are not satisfied. That being the factual position emerged on record, the amount received cannot be treated as FTS. Therefore, the addition made is deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
The assessee has preferred these appeals against order dated 17.01.2019 of the Commissioner of Income Tax (Appeal)- 23, New Delhi in appeal no. 52/17-18 for the assessment year 2013-14 arising out of order dated 30.04.2016 passed by the Dy. Commissioner of Income Tax, Circle 2(2)(1), Intl. Taxn., New Delhi; order dated 27.06.2019 of CIT(A)-43, New Delhi in appeal no. 10316/2018-19 for the assessment year 2016-17 arising out of order dated 15.02.2019 passed by the Dy. Commissioner of Income Tax, Circle 2(2)(1), Intl. Taxn., New Delhi; order dated 09.10.2020 of CIT(A)-43, New Delhi in Appeal no. 10045/2020-21 for the A.Y. 2017-18 arises out of order dated 30.01.2020 passed by the Dy. Commissioner of Income Tax, Circle 2(2)(1), Intl. Taxn., New Delhi. However, as the issues involved are common the same are taken up together for the convenience and to avoid contradictory findings. However, basic facts and figures of AY 2013-14 are being brought on record of the order.
2. The facts in brief are MSTR Singapore is company incorporated in and is a tax resident of Singapore and assessee claims it is eligible to claim the benefit under the India-Singapore Tax Treaty (‘the Treaty’). MSTR Singapore is a wholly owned subsidiary of Microstrategy, Inc. (‘MSTR US’) and is responsible for distribution and maintenance of software to customers in the Asian markets. It also offers consulting, systems integration and education service to its customers. MSTR Singapore sells its products in India through third party partners/distributors. During AY 2013-14, MSTR Singapore had rendered services to certain third party in India against a consideration of RS. 2,23,78,025/-. The company did not offer the receipts of Rs. 2,23,78,025/- to tax in India, as it believed that the Income/Fee do not constitute Royalty/Fees for Technical Services (FTS) as per article 12 of the DTAA between India and Singapore. It was the case of assessee that during the subject AY, the Company did not have any business presence in India to constitute a Permanent Establishment (‘PE’) in terms of Article 5 of the Double Taxation Avoidance Agreement between India and Singapore. The services/ facilities are provided from outside India. Accordingly, rendering of such services/ providing facilities does not result in the constitution of PE in India. Further, the Company does not have any agent in India who could constitute an Agency PE. However the Ld AO held that the consideration for software supplied by the assessee and consideration in lieu of providing information technology related support services is in the nature of royalty income taxable in India. Ld. CIT(A) observed that this issue also came up for determination during the appellate proceeding in its own case for the assessment year 2014-15 in Appeal No. 237/2016-17 before CIT(A)-43, New Delhi. After considering the arguments of the appellant, the CIT(A)-43, New Delhi vide his order dated 31.01.2018, dismissed the appeal.
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