Branch Metrics Inc Vs DCIT (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal considered appeals filed by Branch Metrics Inc., a United States tax resident, against final assessment orders for Assessment Years 2021-22 and 2022-23. The principal dispute concerned whether receipts from Indian customers for SaaS-based products constituted Fees for Included Services under Article 12(4) of the India-USA DTAA read with section 9(1)(vii) of the Income-tax Act, 1961.
For AY 2021-22, Branch Metrics Inc. received ₹24,16,28,878/- from Indian customers for its SaaS-based products. It claimed ₹7,42,26,819/- as exempt under section 10(50), on which equalisation levy at 2% had been paid, and claimed the remaining ₹16,74,02,059/- as business profits not taxable under Article 7 of the India-USA DTAA in the absence of a Permanent Establishment in India.
The Assessing Officer examined the nature of the products through notices issued under section 133(6). Based on the customer responses, the AO proposed treating the entire receipts as Fees for Technical Services. The AO concluded that the services were customized, involved a human element and technical account management, and made available knowledge and skills. The DRP upheld the position, following which the final assessment order taxed ₹24,16,28,878/- at 10% under the DTAA.
