Outsytems Singapore Pte. Ltd. Vs DCIT (ITAT Delhi)
Software Licence Fees Not FTS Because No Technical Knowledge Was Made Available; ITAT Rejects FTS Taxability Because Standard Software Licence Did Not Transfer Copyright; Appeal Allowed Because Assessment Order Was Invalid and Software Licence Fees Were Not FTS
The appeal was filed against the final assessment order dated 10.01.2025 passed under Sections 143(3) read with 144C(13) of the Income Tax Act, 1961 for Assessment Year 2022-23. The assessee did not press the ground challenging the validity of the assessment order for want of a Document Identification Number (DIN), and that ground was dismissed as not pressed. The principal legal challenge was directed against the manual signing of the final assessment order by the Assessing Officer (AO) despite the assessment having been completed through the e-Proceedings system.
The assessee argued that CBDT Instruction No. 1/2018 dated 12.02.2018 mandates that all orders, communications, and notices issued through the e-Proceedings facility must be digitally signed by the Assessing Officer. Since the impugned assessment order had been manually signed, it was contended that the order was contrary to the prescribed procedure and liable to be quashed. On the merits, the assessee challenged the treatment of software licence fees and services amounting to ₹32.52 crore as Fees for Technical Services (FTS). The assessee, a Singapore tax resident with no Permanent Establishment (PE) in India under the India–Singapore DTAA, contended that it merely distributed software licences and that the receipts were not taxable as FTS.
