Edunxt Global SDN – BHD Vs DCIT (International Taxation) (ITAT Bangalore)
Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has set aside a final assessment order against Edunxt Global SDN – BHD, a Malaysian online education provider, ruling that the Assessing Officer (AO) exceeded the scope of a previous remand order. The Tribunal held that the AO was not authorized to reclassify the assessee’s income from “royalty” to “Fees for Technical Services” (FTS) during proceedings that were limited in scope.
The case pertains to the Assessment Year 2014-15. Edunxt Global SDN – BHD, a Malaysian tax resident company, provides online education courses. In the relevant financial year, it earned Rs. 1,27,42,140 by offering an online MBA course to employees of Aditya Birla Management Corporation Pvt. Ltd. (ABMC) under a master service agreement dated April 1, 2013. ABMC had deducted Tax Deducted at Source (TDS) at 20% on the payment, classifying it under Section 9(1)(vi) of the Income Tax Act, 1961, which deals with royalty. Edunxt Global, however, declared nil income in its return, believing the receipt was not taxable in India, and sought a refund of the deducted tax.
Initial Assessment and First Appeal
In the initial draft assessment order (DAO) dated December 27, 2016, the AO determined that the receipts constituted “royalty” income taxable in India. This view was upheld by the Dispute Resolution Panel (DRP) on September 9, 2017, leading to a final assessment order (FAO) on September 26, 2017.
