Murex Southeast Asia Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that receipts from maintenance and support services and additional services, without transfer of any technical knowledge, know-how, skill, etc., are not in the nature of Fee for Technical Services (FTS) and hence not taxable in India.
Facts- The assessee is a non-resident corporate entity incorporated under the laws of Singapore and is a tax resident of Singapore. As stated by the Assessing Officer, the assessee is engaged in the business of providing/sublicensing software to entities in the Financial Service Sector and also provides maintenance and support services and training services.
Assessee has claimed exemption in respect of these income stating that in absence of a permanent establishment (PE), the receipts in the nature of business income cannot be taxed. However, in so far as receipts from maintenance and support services and additional services are concerned, AO treated the same as FTS under Article 12(4) of the India-Singapore Double Taxation Avoidence Agreement (“DTAA”). DRP upheld the decision of AO.
Conclusion- Held that AO has not brought on record any material/ evidence to demonstrate that in course of rendition of such services, the assessee has transferred or made available any technical knowledge, know-how, skill etc. to its clients in India so as to enable them to perform such services independently without requiring the aid and assistance of the assessee. If the Department seeks to invoke Article 12(4)(b) of the treaty the burden is entirely on the department to demonstrate the fulfillment of make available condition through cogent evidence. Unfortunately, the Department has failed to do so.
