DY. CIT (IT)-3(2)(2), MUMBAI, MUMBAI vs. MUREX SOUTHEAST ASIA PRIVATE LIMITED, SINGAPORE

Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in concluding that the receipts amounting to Rs. 15,78,30,425/- received from additional 3 services should not be treated as FTS under section 9(1)(vii) of the I.T. Act r.w. Article 12 of the India- Singapore DTAA without appreciating the facts highlighted by the AO establishing same in the assessment order. 4. The appellant craves leave to amend OR alter any ground OR add a new ground which may be necessary. 2. Rival submissions of both the parties have been heard and record perused. At the outset of hearing, the learned Authorized Representative (learned AR) of the assessee submits that the assessee was incorporated in Singapore and is engaged in the business of providing licensing software to entities engaged in the financial services sector and also rendering services in relation to the software sub-licensed. The assessee is a resident of Singapore and, as per the Double Taxation Avoidance Agreement (DTAA) between India and Singapore, the assessee is eligible to claim benefit under the tax treaty. The assessee holds a valid licence and valid Tax Residency Certificate (TRC). During the year under consideration, the assessee entered into agreement with its various clients in India for providing sub-licensed software and also to provide maintenance and other support and training services, as well as additional services with respect to the said sub-licensed software. As per the provisions of the India-Singapore DTAA, the assessee claimed its India- sourced income from sub-licensing software and rendering training services as well as additional services to be not taxable in the absence of a Permanent Establishment (PE). This position is accepted by the Assessing Officer (AO). The AO further accepted that income from sub- licensing software was not in the nature of “Royalty”. However, the AO concluded that income arising from rendering management services and other support services, as well as training services in relation to the software sub-licensed, is income taxable in terms of “Fees for Technical Services” (FTS) under section 9(1)(vii) of Income Tax Act. On appeal before the learned CIT(A), the assessee was allowed relief by following the decision of the Tribunal in the assesses own case for AY 2019-20 and 2021-22, i.e., the prior and subsequent years, in ITA No. 2417/Mum/2022 and ITA No. 4630/Mum/2023 for AY 2019-20 and 2021-22, respectively. The copy of the decision of the Tribunal is also placed on record. By referring to the decision of the Tribunal in the earlier and subsequent years and by carrying us through various paras of the said order on similar grounds of appeal on similar set of facts, the learned AR of the assessee submits that both the grounds of appeal are covered in favour of the assessee. 3. On the other hand, the learned Commissioner of Income Tax - Departmental Representative (ld. CIT-DR) for the Revenue supported the order of the Assessing Officer. On our specific query as to whether any appeal was filed against the order of the Tribunal dated 13-01-2025, the learned CIT-DR for the Revenue expressed his ignorance about any further appeal against the order of the Tribunal. 4. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. Ground No. 1 relates to addition of Rs. 36.96 crore received from maintenance and support services by treating it as Fees for Technical Services (FTS) under Section 9(1)(vii), and receipt of Rs. 4,33,277/- received from training services by treating it as FTS under Section 9(1)(vii) read with Article 12 of the India-Singapore DTAA. We find that, on a similar set of facts and on similar receipts, the Coordinate Bench of the Tribunal, in the assesses own case for AY 2019-20, which was followed in AY 2021-22, passed the following order. “7. We have considered rival submissions and perused the material on record. The crux of the issue is whether the receipts in dispute qualify as FTS under Article 12(4)(b) of the India- Singapore Treaty DTAA. A careful reading of the said provision makes it clear that a receipt can be treated as FTS if such receipt is towards provision of technical management or consultancy services. Further, in course of rendition of such services the service provider has made available technical know-how, knowledge, skill etc. to the service recipient. So as to enable the service recipient to independently apply such technical knowledge, know-how, skill etc. The facts of the present appeal reveal that the assessee is providing identical nature of services year on year basis. Had it been the case that the assessee has made available technical knowledge, know-how, skill etc. to the service recipient, there would not have been any requirement for the assessee to provide such services on recurring basis. This is so because, once the technical knowledge, know-how skill etc. is made available to the service recipient, it enables the service recipient to independently perform such services without requiring the aid and assistance of service provider. Pertinently, while considering identical nature of dispute in assessee's own case in A.Y. 2018-19, the Coordinate Bench in ITA No. 2338/Mum/2022 dated 08.05.2023 had examined the nature of services provided by the assessee in terms with the agreement and concluded that the receipts are not in the nature of FTS. For better appreciation, the relevant observations of the Coordinate Bench in this regard are reproduced hereunder:

Further before us, the ld. Counsel for the assessee has given comparison of relevant clauses of simple agreements submitted by the assessee that the software sub-license and services agreement as well as maintenance agreement vis-à-vis nature of maintenance, other support services and training services rendered by the assessee which have been highlighted as Nature of services rendered/facts of Relevant clauses from the sample the case of the Appellant agreements During the year under consideration, the Annex 5- Maintenance Procedure Clause 2- Appellant has rendered maintenance and General Assistance other support services to the in-House support team of the Indian customers by 2.1 Service: MSEA's "General Assistance" way of telephone / email / remote log-in assistance with respect to usage of the services comprise the provision of software program. Such assistance consists telephone and/or email responses to of responding to the Indian customer's reasonable questions communicated by an reasonable team questions communicated Support In-House Team the Office member by the In-house support concerning use of to MSEA regarding the use or operation Software program and resolving the of the software program in accordance discovery of bug. with the agreement.... For example, there could be a time gap in Clause 3 Corrective Maintenance input of data and the output generated i.e., Indian customer inputs data in the 3.1 Service: MSEA's "Corrective software at 10.54 am but the output is Maintenance" services consist of using generated at 11.00 am. This time gap is a reasonableefforts to Resolve an Error or bug as the reports should be generated Critical Error in the Software Program within seconds / a minute and timings identified by the SUBLICENSEE during cannot be haywire. The Appellant submits applicable Maintenance Term, i.e., to that these are the kind of bugs which the identify and reproduce the Error or Critical Company is resolving and providing by way Error and, to the extent practicable using of software Further, the Company submits reasonable efforts, to diagnose the Error or that during the year under consideration Critical Error, and upon such identification there is no on-site maintenance and and diagnosis, to extent the practicable support services assistance provided by using reasonable efforts in the good faith MSEA to Indian customers the under judgment of MSEA, to provide a correction during year consideration. The Company of the Error or Critical Error or, if no also submits that it is a non-resident with correction is available, a reduction of the no presence /Permanent Establishment in effects of, or a work-around solution with terms of India-Singapore DTAA in India and respect to, the Error or Critical Error (e.g. there is maintenance team of the Company reversion of a change in configuration or a in India. no change in the way using the of Software Program by the Users to its previous value) Article 1: Maintenance Services Telephone'and Email Assistance to SUBLICENSEE or Sublicensee Affiliates: MSEA will provide telephone and/or email assistance to the In-House Support Group (as defined in Article 1.3.1 hereof) during MSEA'S normal business hours (09:00 to 18:00 Singapore time, Monday through Friday excluding holidays in Singapore)...Such assistance will consist of responding to SUBLICENSEE'S reasonable questions concerning SUBLICENSEE'S or the Sub licensee Affiliates' use of the Software Program, as the case may be... The Role and requirement of the la-House Clause 4: In-House Support Team support team: The Maintenance Services provided by As highlighted in the agreement, the in- MSEA hereunder constitute second-level House support team is required to maintenance. understand the concerns / requirements Accordingly,SUBLICENSEEmust establish from the Indian customers employees who and an maintain in-house technical support are actually using the software and explain team of Users at each Site whose members the same to Appellant's technical team to possess the requisite business and technical help them resolve the errors /bugs. in competencies and knowledge respect of each Site and in respect of each Authorized As you will appreciate the Indian customers Business and have received appropriate to whom the Appellant caters to are training from MSEA and are competent in generally large financial organizations with the use of the Software Program ("In-House many employees in its organization. For Support Team")... example, say SBI, which is one of the customers to whom the Appellant sub- 1.3.1 In-House Support licenses its of software, employees, some of whom are using the Murex Software. SUBLICENSEE'S in-house support group in large Similar has to lakhs any organization, Mumbai ("In-House Support Group") will be SBI has also an internal established generally responsible for providing Internal Information Technology (IT) team i.e. In- and External Users with technical House support team. The employees using assistance and training regarding the the MSEA software raise their software use of the software program("In-House usage related queries /bugs to the In- Support"). The In-House Support will House support team. Thereafter, the In- include general technical assistance House support team co-ordinates with the and trainingof Appellant for resolving such queries / bugs. If every employee in the organization co- SUBLICENSEE'S Internal External and ordinates with the Appellant for their Users. independent queries /bugs, it would become difficult for the Appellant to 1.3.2 Maintenance Services….The In - resolve the queries / bugs. Thus, the In- House support Group will be House support team of the Indian responsible for all communications customers is mainly a centralized point of with MSEA in respect of any questions contact for purpose of coordination of encountered in any Site concerning queries / bugs and related activities of SUBLICENSEE'S use of the Software Indian customers with MSEA. Since the role Program of In-House support team involves coordinating with MSEA regarding the issues in the MSEA software program, the personnel in such In-House support team / IT team need to be competent to know how to use the software program to be able to effectively explain the query / bug to MSEA which would then enable MSEA to identify the issue and resolve the same. Description of training provided as part of 1.1.3 Training the Maintenance services: Upon the request of SUBLICENSEE, and at The Company submits that it provides times and locations to be mutually agreed training to the end users and In-house between the parties, MSEA will train team members of the Indian it is SUBLICENSEE and Sub licensee customers only with respect to the proper Affiliates on the proper usage of the usage of the program. Considering it is a Software Program. specific software for financial sector customers, necessary for the Appellant to provide training to the Indian customers else the software would be of little value / use to the said customers. In simple terms, such training is akin to training provided individual for operating any product such as a software like SAP, Tally, Microsoft Excel or even a refrigerator / water purifier. Further, the training is generally provided at the initial stage when the software is sub-licensed and subsequently provided only on need basis e.g. if there is an additional module which is sub-licensed or there is a change in the Indian customers users / In-House support team etc.

On the other hand, ld. DR had referred to the same agreement and submitted that the ld. AO has rightly concluded that the income earned from maintenance agreement is nothing but fee for technical services and also 'make available' for technical expertise as well as delivery of technical plan is there.

After considering the relevant clauses of the maintenance agreement, we find that the assessee rendered maintenance and other support services to the in- house support team of Indian customers through telephone / email/ login assistance with respect to usage of the software programme. Such assistance is by responding to reasonable questions communicated by the in-house support team concerning the use of software programme and resolving the discovery of bug in respect of software supplied by the assessee. Before us, certain instances and examples have been cited as to how the assessee has been resolving the issue arising out of bugs provided by the software during the softwaremaintenance. Further there are no onsite maintenance and support services, assistance provided by the assessee to the Indian customers. Apart from that, another very important fact is that there is no permanent establishment or any maintenance team of the company in India. Indian customers have in-house support team which is required to understand the source /requirements from the Indian customers. Employees of the Indian customers who are using the software, if they happen to come across any problem, then the same is referred to the assessee's technical team to help them to resolve errors/ bugs. These Indian customers are mainly big organizations and the one of the biggest customer was SBI, to whom the assessee has sub-licensed its software and which is used by lakhs of employees. SBI has an internal IT team to cater assistance to their employees in case there are any queries / bugs. That in-house team coordinates with assessee for resolving such queries / bugs. The in-house support team of the Indian customers is mainly a centralized point of contact for purpose of co-ordination and related activities of Indian customers with the assessee. Since, the role of in-house support team involves coordinating with the assessee regarding MSEA software programme supplied by the assessee, the personnel in such In-House support team / IT team need to be competent to know how to use the software program to be able to effectively explain the query / bug to MSEA which would then enable MSEA to identify the issue and resolve the same. This fact is clearly borne out from the relevant clauses of the agreements which has been filed before us and also which has been noted in the foregoing paragraphs.

In so far as the training part is concerned, the assessee company provides training to the end users and in-house team members of the Indian customers only with respect to the proper usage of the program. This training is a akin to training provided for operating any product, software and it is generally provided at the initial stage when the software is sub-licensed and subsequently provided only on need basis. Apart from that, as a part of maintenance services, assessee also provides updates to the software programmes like correction of errors, improvements concerning existing functioning of program, and changes intended to improve calculations/results/formulate of software program etc. There is no addition in the functionalities through such update which are only standard updates and not customization. Thus, the entire maintenance service contract is dependent on the software sublicensing agreement. In case of separate agreements for sublicensing and maintenance, there is a termination clause which provides that maintenance services will automatically terminate if software sublicensing contract isexpired or terminated. Here, fees for maintenance services are annual and based on a percentage of licence fee and is not dependent upon the number of queries / bugs raised or resolved by the assessee. 12. If it is of recurring annual fees, there is no question that assessee was making available any technology or knowhow of the Indian customers on year to year basis as has been interpreted by the ld. AO. Assessee is having the technical expertise in the software sub-licensed by it. If there is any bug or problem faced by the customers while using the software, assessee provides trouble shooting to fix those bugs and helps them for maintaining and support of the software used by the clients. This does not mean that assessee had made available any technology in software. 13. Another allegation is that services have been provided on on telephone, on email, remote login and providing training for the software and therefore, it is 'make available'. If assessee is resolving the problems on software sub-licensed by it, this does not per se mean that any technology has been transferred or any know how has been make available which can enable the in-house team of the customer to acquire the technology. Thus, such maintenance support services and training services do not fall in the ambit and nature of FTS within Article 12(4) of India-Singapore DTAA, as these services do not make available any technical skill knowledge or expertise etc., which can enable Indian customer to apply the technology content therein. Thus, we hold that these services are not liable to be taxable. In the result, this issue is passed in favour of the assessee." 8. Factual position relating to the issue being identical in the impugned assessment year, respectfully following the decision of the Coordinate Bench in assessee's own case as referred to above, we hold that receipts are not in the nature of FTS.

Considering the fact that on similar grounds of appeal on similar set of facts the assessee was allowed relief in AY 2019-20, which has been followed by the learned CIT(A), thus, respectfully following the same, we do not find any reason to interfere with the finding of the learned CIT(A), which we affirm. No contrary facts are brought to our notice to take other view. In the result, Ground Nos. 1 and 2 of the appeal raised by revenue are dismissed.

Ground No. 3 relates to the addition of Rs. 15.78 crore received from additional services, which was treated as FTS under Section 9(1)(vii) read with Article 12 of the India-Singapore DTAA. We find that on a similar ground of appeal on facts, the Coordinate Bench of the Mumbai Tribunal, in the assesses own case for AY 2019-20 (supra), the Tribunal passed the following order. “14. We have considered rival submissions and perused the material on record. Facts on record reveal that the additional services rendered by the assessee are only to the extent of migration of software from old version to new version. The Assessing Officer 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 fulfilment of make available condition through cogent evidence. Unfortunately, the Department has failed to do so. The other allegation of the Assessing Officer that the assessee has offered similar income to tax in A.Y. 2018-19 does not stand to reason in view of the fact that in A.Y. 2018-19, the assessee offered it as business income in view of the fact that it had a service PE in India. Whereas, it is the assertion of the assessee that in the impugned assessment year there was no PE in India. Even, in the assessment order, there is no allegation by the Assessing Officer regarding existence of PE in India. In that view of the matter, once the receipts are not in the nature of FTS under Article 12(4) of the Treaty, they have to be treated as business receipts and in absence of PE in India, cannot be made taxable. In view of the aforesaid, we hold that receipts in dispute are not taxable in India. Ground is allowed.” 7. We find that while allowing relief to the assessee, the learned CIT(A) has followed the order of the Tribunal. No contrary fact is brought to our notice. Thus, respectfully following the same, we do not find any reason to interfere with the finding of the learned CIT(A). In the result, Ground No. 3 of the appeal is also dismissed. 8. In the result, the appeal of the revenue is dismissed. Order was pronounced in open court on 17/09/2026. Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER