DCIT(IT)-1(1)(1) MUMBAI, MUMBAI vs. ALIBABA.COM SINGAPORE E-COMMERECE PVT. LTD., MUMBAI

1. to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that Infomedia 18 Pvt Ltd. does not constitute a business connection' of the assessee in India under the provisions of section 9(1)(1) of the Income Tax Act, 1961 (the Act) and accordingly, the income of the assessee was not taxable in India as business income? 2.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that Infomedia 18 Pvt Ltd does not constitute a' permanent establishment of the assessee in India under the provisions of Article 5 of the DTAA between India and Singapore and, accordingly, the income of the assessee was not taxable in India as business profit under the provisions of Article 7 thereof 3.Without prejudice, whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that 3 the payments made by the Indian Suppliers to the assessee is not Rs taxable in India as Fee for Technical Services (FTS) under the provisions of section 9(1)(vii) of the Act? 4.Without prejudice, whether on the facts and in the circumstances of the case and in law, DTAA between India and Singapore would be applicable and whether therefore, the Ld. CIT(A) has erred in holding that the payments made by the Indian Suppliers to the assessee is not taxable in India as Fee for Technical Services (FTS) under the provisions of Article 12 of the DTAA?”

At the outset, it has been pointed out that in so far as Ground No. 1 & 2 are concerned, it has wrongly been taken by the department and there is no such issue of controversy with regard to whether Infomedia 18 Pvt. Ltd., constitutes business connection of the assessee or PE in India because in these years there is no connection with Infomedia 18 Ltd., Ld. DR also agreed that these two grounds do not arise out of impugned orders, accordingly, Ground Nos. 1 & 2 are dismissed as infructuous. For the reason that agreement with Infomedia 18 Pvt. Ltd., has been terminated on 29/12/2010 and subsequently replaced by Alibaba.com India.

to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., 3. The only controversy involved here in this case is with respect to payments made by Indian subscribers to the assessee company which has been taxed as FTS by the ld. AO under provision of Section 9(1)(vii) and under the Article of India-Singapore DTAA.

The brief facts are that the assessee, Alibaba Singapore, is a company incorporated under the laws of the Republic of Singapore and is a tax resident of Singapore in terms of the India–Singapore Tax Treaty. It operates a global online platform through www.alibaba.com, enabling small and medium-sized businesses across the world, including those in India, to list their products and maintain online storefronts accessible to potential buyers. During the relevant assessment years, the Company adopted a structured business model for the sale of subscriptions in India pursuant to a reseller agreement entered into with Alibaba.com India E- Commerce Private Limited (“Alibaba India”), a private limited company incorporated in India under the Companies Act, 1956 and forming part of the Alibaba Group. Under the reseller arrangement, Alibaba India was appointed on a non- exclusive and principal-to-principal basis, purchasing subscription facilities from Alibaba Singapore in its own name and independently selling the same to Indian customers. Indian subscribers contracted directly with Alibaba India for obtaining the subscription facility, which essentially enabled them to post advertisements, business details, and product listings on the platform. Alibaba India undertook authentication and verification of subscriber details through to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., third-party agencies, the costs of which were reimbursed by Alibaba Singapore. Based on the number of authenticated subscribers, Alibaba India placed requisitions with Alibaba Singapore for the corresponding number of subscriptions and remitted the subscription fees. Upon successful verification and payment, the subscribers were provided with an Account enabling them to upload business information, display products, and engage with potential buyers. All subsequent communication between subscribers and buyers took place independently without the involvement or participation of either Alibaba Singapore or Alibaba India. Neither entity maintained any stock, undertook delivery of goods, facilitated financial settlements, or engaged in any trading transactions; their limited role was that of maintaining an electronic facility analogous to a digital version of the traditional Yellow Pages. Diagrammatic representation of the Company’s operations in India can be demonstrated in the following manner:

Before us it has been pointed out that this issue had arisen in A.Y.2009-10 to 2011-12 wherein the DRP in assessee’s own case had directed that the subscription receipts would not been characterized as FTS. For the sake of ready reference DRP’s direction issued on 24/03/2015 are as under:- “We have considered the facts of the case and the submissions made. There is no dispute that the assessee provides the services to list and display the products on the website for marketing and sale The facts in this case are similar to the facts in eBay International AG case cited by the assessee. In this case, it has been held that services as rendered by the assessee through its HK parent are not taxable as FTS. Accordingly it is held that, in the facts and circumstances of the to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., case and considering the nature of activities and the services by the assessee, the income of the assessee or any part thereof is not assessable as FTS under the Act. Hence this objection is therefore accepted.”

Apart from that this Tribunal in assessee’s own case for the A.Yrs. 2009-10 & 2010-11 had specifically dealt this issue in detail. For the sake of ready reference, the relevant observation of the Tribunal is as under:- “Now we will come to the revenue's appeal, whereby the Department has challenged the DRP's direction that the revenues received from Indian are taxable as "Fees for Technical Services" @ 10% under provisions of section 9(1)(vii) on the ground that scope of the services used in the said section is very wide which needs to be broadly interpreted. In support the AO relied upon the various decisions which have been discussed by him at pages 6 to 8 of his final assessment order. Apart from that, the AO has also made certain observations in para 37 & 38 which reads as under:- "In the instant case form the provisions of the Marketing Support Agreements, it is evident that services provided by the Assessee both within and outside India in the form Accounting and Finance Support Services Human Resources Services, Legal and Compliance Services, Risk Management Services, Quality Consultation and Training, Sales and Marketing, Information Technology and System Support, Strategic Management Assistance, Assistance in respect of various business processes and sourcing Services for which payments are made, would amount to rendering managerial and light of the above, the amounts received by the Assessee would be taxable in India as Fees for Technical Services u/s 9(1)(vi) of the Act. It is further said that the assessee's case does not fall within any of the exceptions to the deeming provision as laid out in section 9(1)(vii)(b) which provide that:- (i)If the payment is made for the purpose of business carried out by the resident outside India, or to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., (ii) If the payment is made for earning an income from a source outside India; Then such payment would not fall within the ambit of fees for technical services" Thereafter, he observed that, source does not mean the location of the bearer but the place where profit making activities were carried out. We are unable to appreciate as to from where the Assessing Officer has made this observation that assessee within and outside India has rendered various kind of services as has been highlighted by him. We have already discussed in detail the nature of business carried out by the assessee and its modus operandi for getting the subscription even from Indian Subscribers. All these activities have been highlighted by him are not carried out by the assessee at all. The entire observation appears to be completely out of context and without any reference to the material on record qua the activities carried out by the assessee for earning of subscription fees. We have already discussed the same on the basis of material on record and submissions made before us, that the services provided by the assessee to the Indian Customers were merely that of displaying / storing of data of Indian Subscribers, such services are limited to provision of E- commerce platform for advertising of or product of services in India, players /suppliers to the global powers ie. provision of services of B2B E-Commerce platform on the website of the company as the "Fee Based Services". The arrangement between the Alibaba-Singapore and subscribers is for the provision of services for standard facility and not for provision for "rendering of any technical, managerial or consultancy services" as enshrined in section 9(1)(vii) r.w. Explanation 2. The subscriber uses the portal of Alibaba.com for advertising its product for the global clients. There is no human involvement or any kind of any constant human endeavor for rendering or providing any technical services to such subscribers which can be reckoned in the nature of any managerial, technical or consultancy services with some kind of human involvement. Constant human endeavor or human intervention is essential requirement for treating the rendering of services an "technical". If any technology or a process has been put to operation automatically wherein it operates without much human interface or intervention then such technology per to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., se cannot be held as rendering of technical services by human skills. This matter has now been settled by the Hon'ble Supreme Court in the case of CIT vs. M/s Kotak Securities Ltd, CA No.3141 of 2016 which reads as under:- 7. "Managerial and consultancy services and, therefore, necessarily "technical services", would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd. (supra). However, it cannot be lost sight of that modern day scientific and technological developments may tend to blur the specific human element in an otherwise fully automated process by which such services may be provided. The search for a more effective basis, therefore, must be made 8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant up gradation of the services made available and of the essential parameters connected with the trade including those of a particular / single transaction that would lead credence to its authenticity is provided for by the Stock Exchange. All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange "Technical services like "Managerial and Consultancy service would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. In is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, to 3217/Mum/2025 Alibaba.com Singapore E-Commerce Pvt. Ltd., should come within the ambit of the expression "technical services appearing in Explanation 2 of Section 911v of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act.

There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System) for which the charges in question had been paid by the appellant assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every Transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services as appearing in Explanation 2 to Section 9(1)(vii) of the Act"

After considering the facts, the ITAT has come to the conclusion that activities highlighted by the AO are not carried out by the assessee at all and the services provided by the assessee to the Indian Customers were merely that of displaying / storing of data of Indian Subscribers, such services are limited to provision of E-commerce platform for advertising of products or services in India. The ITAT came to the factual finding that the arrangement between assessee and the subscribers was for the provision of services for standard facility and not for “rendering of any technical, managerial or consultancy services” as provided in section 9(1)(vii) r/w Explanation 2 of the Act.

The ITAT has also relied upon the judgment of the Apex Court in the case of Commissioner of Income-tax-4, Mumbai vs. Kotak Securities Ltd. and held that constant human endeavour or human intervention is essential requirement for treating the rendering of services as “technical”. If any technology or a process has been put to operation automatically, wherein it operates without much human interface or intervention, then such technology per se cannot be held as rendering of technical services by human skills. Where there is a standard facility made available for public at large, without giving any special or exclusive services whether to a particular client or class of clients, then it cannot be brought within the ambit of technical services as stipulated in Explanation 2 to section 9(1)(vii). Therefore, on facts, even these grounds of the Revenue were correctly rejected in coming to a finding that no technical services had been provided by the Assessee to treat the subscription fees as to be in the nature of fees for technical services.”

In the result, appeals of the Revenue are dismissed.