CA (Singapore) Pte. Ltd. Vs ACIT (ITAT Mumbai)
Software Support ≠ FTS: ITAT Holds Ancillary Support Services to Be DTAA-Protected, Deletes ₹482.77 Cr FTS Addition
The Mumbai ITAT has partly allowed the appeal of CA (Singapore) Pte. Ltd. and deleted the addition of ₹48.27 crore made by treating ancillary support services linked to software distribution as Fees for Technical Services (FTS) under Article 12 of the India–Singapore DTAA for AY 2022-23.
The Assessee, a Singapore tax resident, distributed software licenses in India and provided support & maintenance services in relation thereto. The AO/DRP held that the consideration of ₹48.27 crore for ancillary support services was FTS, alleging that the services “made available” technical knowledge and allowed customization, and taxed it in India.
Reversing the AO/DRP, the ITAT held that:
- The support & maintenance services were ancillary & subsidiary to the sale/distribution of software under the EULA/partner agreements.
- “Make available” test was not satisfied; the services did not transfer technical knowledge or skill enabling customers to apply it independently.
- Merely billing support services separately does not break the intrinsic linkage with software sales.
- The AO failed to demonstrate why such services could not be regarded as ancillary to the licensed software.
- The issue is squarely covered by Mumbai ITAT precedents including Murex Southeast Asia Pvt. Ltd. and Juniper Networks International B.V.
Consequently, the ITAT set aside the FTS characterization, deleted the tax on ₹48.27 crore, and allowed Grounds 3 to 3.6. Grounds relating to surcharge, cess, interest & penalty were held consequential. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
