SABRE MARKETING NEDERLAND, BV.,NETHERLANDS vs. ACIT,CIRCLE-3(1)(2),INT. TAX., NEW DELHI

ITA 1696/DEL/2022Status: DisposedITAT Delhi29 September 2026AY 2018-1917 pages
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What were the facts?

The assessee, Sabre Marketing Nederland, B.V. (SMNBV), a Netherlands-based company, filed appeals against assessment orders for Assessment Years 2018-19 and 2019-20. The orders were passed by the Assistant Commissioner of Income Tax (ACIT) pursuant to directions from the Dispute Resolution Panel (DRP). The assessee provides technology solutions to the airline industry, primarily earning revenue from Jet Airways (India) by providing subscription services for Sabre Sonic Reservations systems and Air-Vision/Air-Centre systems. The assessee's contention is that these revenues, amounting to INR 212,94,37,552/-, are business income and not taxable in India as Fee for Technical Services (FTS) under the Income Tax Act or the India-Netherlands Double Taxation Avoidance Agreement (DTAA). The assessee claims it has no presence or human intervention in India, with services rendered through servers located outside India.

What did the Tribunal hold?

The Tribunal held that the services provided by the assessee to Jet Airways do not fall under the category of FTS under Article 12(5) of the India-Netherlands DTAA or Section 9(1)(vii) of the Act. The Tribunal noted that the assessee provides a software system on a subscription basis, and the revenue is earned per passenger. The assessee's assertion of no human intervention and the use of a standard facility for services, with servers located outside India, was not rebutted by the Revenue. The Tribunal relied on judicial precedents, including *Bharti Cellular Ltd. v CIT*, *Skycell Communications Ltd.*, and *Kotak Securities Ltd.*, which emphasize the necessity of human interface or direct and constant involvement of human endeavor for services to be classified as technical services. Furthermore, the Tribunal found that the 'make available' clause was not fulfilled, as Jet Airways does not apply the technology independently, is not privy to it, and the assessee retains intellectual property rights. Training and support services were limited to system usage and did not transfer technology. Therefore, the consideration received does not qualify as FTS. Grounds 1 to 5 were allowed. Ground 6 (interest under Section 234B) and Ground 7 (penalty under Section 270A) were noted as consequential and premature, respectively.

What were the issues?

1. Whether receipts of INR 232,83,88,797/- (for AY 2018-19, amount stated in grounds of appeal is different from facts) from customers constitute 'Fee for Technical Services' ('FTS') taxable under Section 9(1)(vii) of the Income-tax Act or Article 12 of the India-Netherlands DTAA. Assessee's arguments: - Services rendered do not 'make available' any technical knowledge, skill, or know-how to the customer for independent application. - Trainings provided are for service usage, not for transferring knowledge for future independent application. - Services are provisioned through servers located outside India without human intervention, thus not qualifying as FTS, citing the Supreme Court judgment in *Bharti Cellular Ltd. v CIT*. - Human involvement in development does not equate to human intervention in service rendition. - Standard services provided to all customers do not qualify as FTS, citing *Kotak Securities Ltd.*. - Taxation of FTS is not at par with proposed taxation of digital services under UN Model Convention Article 12B. Revenue's arguments: - Not explicitly recorded in the provided text, but implicitly argued through the assessment order and DRP directions that the services constitute FTS.

Which sections of the Income-tax Act were involved?

Section 9(1)(vii),Section 143(3),Section 144C(13),Section 234B,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:

The above captioned two appeals are preferred by the same assessee against the assessment order dated 31.05.2022, passed by The Assistant Commissioner Of Income Tax, Circle Int Tax 3(1)(2), Delhi (hereinafter referred to as ‘ld. AO), passed under section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (hereinafter ‘the Act’) in pursuance of direct

The order continues below.

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