Service Now Nederland BV Vs ACIT (ITAT Delhi)
Summary: The Delhi ITAT partly allowed Service Now Nederland BV’s appeals for the relevant assessment years and deleted additions made by treating receipts from subscription, professional and training services as fees for technical services (FTS). For A.Y. 2020-21, the Assessing Officer had taxed INR 171,92,37,658 as FTS under the India-Netherlands DTAA, while for the subsequent year an addition of INR 248,32,06,556 was made on the same basis.
The Tribunal followed its decision in the assessee’s own case for A.Y. 2019-20. It noted that the assessee merely granted access to software and there was no transfer of technology. Article 12(5)(b) of the India-Netherlands DTAA required technical knowledge, experience, skill, know-how or processes to be “made available” to the recipient. Relying upon CIT v. De Beers India Minerals (P.) Ltd., the Tribunal reiterated that the recipient must be enabled to apply the technology independently.
It consequently held that the subscription, professional and training services did not constitute FTS under the Act or DTAA and could not be taxed in India. For the subsequent year, identical facts led to deletion of the INR 248,32,06,556 addition. The AO was directed to grant TDS credit after factual verification, while interest was held consequential and the penalty-initiation grounds were considered premature.
