Case Law Details
Salesforce.com Singapore Pte Vs DDIT (ITAT Delhi)
Conclusion: Income earned by assessee from the Indian customers with respect to the subscription fees for CRM could not be taxed as royalty as per section 9(1)(vi) of the Act as well as Article 12(3) of the treaty as by granting access to the information forming part of the database, assessee neither shared its own experience, technique or methodology employed in evolving databases with the users nor imparted any information relating to them.
Held: Assessee was a company incorporated in Singapore and was a tax resident of Singapore and was a leading provider of comprehensive Customer Relationship Management (CRM) services to its customers. Services rendered by assessee help the client in generating reports and summaries of the data which was fed into the sales force database by the client itself. Assessee’s database provides access for the client’s own use to generate reports, basis the information fed in by the client in the desired format. The access to the assessee’s database was for a limited duration and the period for which the subscription fee was paid by the client. Assessee did not have a place of business in India and subscription fees for CRM services did not qualify as royalty or fees for technical services under the DTAA. AO alleged that assessee had been providing services in the form of Web services and was made available to users over a network, which was normally through the web/internet. AO further observed that by entering into the agreement, clients did not get ownership rights on any of the above items. They only get a right to use the equipment and software and therefore, the same was squarely covered under the definition of Royalty, both under section 9(1)(vi) of the Income-tax Act, 1961 as well as under Article 12 of India Singapore DTAA. It was held that assessee provided web-based online access to its customer’s data hosted on servers located in data centers maintained by the assessee outside India. Assessee did not have any data centers in India and hence it could not be considered to have a fixed place of business in India. Assessee neither had a place of management in India nor had any equipment or personnel in India. This fact has also been accepted by the ld. CIT(A) in his order. Therefore, in the absence of granting any control over the equipment belonging to the assessee to its customers, the allegation of the AO that the amount so received would constitute ‘Royalty’ was not acceptable. Further, assessee did not provide any information concerning industrial, commercial, scientific experience. Assessee only had processed the proprietary data of the customers and provided the result in form of desired reports etc. On this count also, it could not be said that consideration for CRM services were in the nature of royalty. If the services had been rendered de hors imparting of knowledge or transfer of any knowledge, experience or skill, then such services would not fall within the ambit of Article 12 of the treaty. Further, by granting access to the information forming part of the database, the assessee neither shared its own experience, technique or methodology employed in evolving databases with the users nor imparted any information relating to them. Therefore, the income earned by assessee from the Indian customers with respect to the subscription fees for CRM could not be taxed as royalty as per section 9(1)(vi) of the Act as well as Article 12(3) of the treaty.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above captioned bunch of seven separate appeals by the assessee pertains to Assessment Years 2010-11 to 2016-17. Since the underlying facts in issues are common, all these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity.
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