SERVICENOW NEDERLAND BV,HYDERABAD vs. ACIT, CIRCLE INTL. TAX. 3(1)(2), DELHI

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ITITA 45/DEL/2026Status: DisposedITAT Delhi28 July 2026AY 2023-245 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the assessee did not press grounds 1 and 2, and accordingly, these grounds were dismissed as not pressed. The Tribunal observed that grounds 3, 4, and 5 were squarely covered by the orders of a coordinate Bench of the ITAT in the assessee's own case for AY 2019-20, 2020-21, and 2021-22. Furthermore, the revenue's appeal before the Hon'ble Delhi High Court on the same issues was dismissed by the jurisdictional High Court on July 11, 2024. The Tribunal found that the orders of the coordinate ITAT Benches and the Hon'ble Delhi High Court squarely covered the issues raised by the assessee in grounds 3, 4, and 5 in favor of the assessee. Consequently, grounds 3, 4, and 5 were allowed. Grounds 6, 7, and 8 were considered consequential in nature. The addition of INR 11,02,89,33,913 was deleted based on the reasoning that the income was not taxable as FTS and the principle of consistency, as upheld by the higher authorities in the assessee's own cases. The Tribunal also noted that the penalty proceedings under section 270A (Ground 9) were consequential.

What were the facts?

The assessee, Service Now Nederland BV, filed an appeal against the final assessment order dated January 14, 2026, passed by the ACIT, Circle International Taxation-3(1)(2), Delhi, for Assessment Year 2023-24. The order was passed under section 143(3) read with section 144C(13) of the Income Tax Act. The assessee raised several grounds of appeal, including that the assessment order was barred by limitation, that the AO failed to follow DRP directions, that the AO relied on incorrect facts regarding pending departmental appeals, and that the AO erred in treating subscription fees and fees for professional and training services as Fees for Technical Services (FTS) taxable in India under the India-Netherlands DTAA. The assessee also argued that the income was not taxable as FTS, that the AO made assumptions without evidence, and that the income was subject to Equalization Levy, making it exempt under section 10(50). The amount in dispute for subscription fees and professional/training services was INR 11,02,89,33,913.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the final assessment order dated January 14, 2026, passed by the ACIT is barred by limitation under section 153(1) of the Income Tax Act, rendering it void-ab-initio. 2. Whether the ACIT erred in not acting in accordance with the binding directions of the Dispute Resolution Panel (DRP) by failing to verify facts and pass a detailed speaking order. 3. Whether the ACIT erred in proceeding on erroneous facts that departmental appeals for AY 2019-20, AY 2020-21, and AY 2021-22 were pending before the High Court, when they had been disposed of in favor of the assessee. 4. Whether the ACIT erred in not following binding judicial precedents of the jurisdictional High Court and ITAT in the assessee's own case for AY 2019-20, 2020-21, and 2021-22, which held that income earned by the assessee is not taxable as FTS under the India-Netherlands DTAA. 5. Whether the ACIT erred in not following the rule of consistency given the binding orders in the assessee's own case. 6. Whether the ACIT erred in adding INR 11,02,89,33,913 to the income on account of subscription fees and fees for professional and training services, as these do not fall within the purview of FTS under Article 12 of the India-Netherlands DTAA. 7. Whether the ACIT erred in assuming technical knowledge was made available without substantiating it with material evidence. 8. Whether the ACIT erred in concluding the income is FTS without appreciating that Equalization Levy was deposited, making it eligible for exemption under section 10(50). Assessee's contentions: - Grounds 1 and 2 were not pressed. - Grounds 3, 4, and 5 are covered by the order of a coordinate ITAT Bench in the assessee's own case for AY 2019-20, 2020-21, and 2021-22. - The revenue's appeal before the Delhi High Court on the same issue was dismissed on July 11, 2024. - The income earned is not taxable as FTS under the India-Netherlands DTAA. - The AO made assumptions without evidence. - The income is eligible for exemption under section 10(50) due to the deposit of Equalization Levy. Revenue's contentions: - No specific contentions are recorded for the revenue on the grounds that were pressed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 153(1),Section 10(50),Section 270A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SH. VIKAS AWASTHY & SH. KRINWANT SAHAY

For Appellant: Ms. Aakriti Bansal, CA
Hearing: 26.05.2026Pronounced: 28.07.2026

PER KRINWANT SAHAY AM

Appeal in this case has been filed by the assessee against the order dated 14.01.2026 passed by the ACIT, Circle International Taxation-3(1)(2), Delhi, u/s. 143(3) r.w.s. 144C(13) of the IT Act for the A.Y. 2023-24. Grounds of appeal are as under :-

1.

On the facts and circumstances of the case and in law, the final assessment order (Impugned Order") passed by the Assistant Commissioner of Income tax, Circle International Taxation 3(1)(2), Delhi ('Ld. AO') dated 14 January 2026 under section 143(3) read with section 144C(13) of the Act is barred by limitation under section 153(1) of the Act, and therefore, la void-ab-initio, bad in law and is accordingly liable to be quashed. 2. On the facts and circumstances of the case and in law, the Ld. AD erred in not acting in accordance with the binding directions of the Hon'ble Dispute Resolution Panel (DRP) by failing to verify the facts and pass a detailed speaking order as specifically directed and hence such order is liable to be quashed. 3. On the facts and circumstances of the case and in law, the Ld. AO erred in proceeding on erroneous and incorrect facts that departmental appeals for AY 2019-20, AY 2020-21 and AY 2021- 22 wert pending before the Hon'ble High Court, despite the fact that the said appeals had already been disposed in favour of the Appellant and the same has been duly brought to the notice of the Ld. AO and substantiated during the course of assessment proceedings. 3. On the facts and circumstances of the case and in law, the Ld. AO erred in not following the binding judicial precedents of jurisdictional beach of the Hon'ble High Court and the jurisdictional bench of the Hon'ble Income Tax Appellant Tribunal ('ITAT) in the Appellant's own case for AY 2019-20, AY 2020-21 and AY 2021-22, wherein it has been held that the income 2 | P a g e

earned by the Appellant in India is not taxable as the same does not fall within the ambit of Fees for Technical Services (FTS) under the India-Netherlands Double Taxation Avoidance Agreement (DTAA) 4. On the facts and circumstances of the case and in law, the Ld. AO erred in not following the rule of consistency, given the binding order of the Hon'ble High Court and Hon'ble ITAT in the Appellant's own case, despite identical facts and without providing any reason for doing so. 5. Without prejudice to the Ground No.1, 2, 3 and 4 above, the Ld. AO grossly erred in making an addition of INR 11,02,89.33.913 to the income of the Appellant on account of subscription fees (amounting to INR 10,83,26,60,109) and fees for professional and training services (amounting to INR 19,62,73,804) without appreciating the fact that these services do not fall within the purview of FTS under Article 12 of the India- Netherlands DTAA and hence not taxable in India. 6. On the facts and circumstances of the case and in law, the Ld. AO erred in merely assuming that there is make available of technical knowledge by the Appellant to the service recipient without bringing any materials on record to substantiate the same. 7. Without prejudice to the Ground No. 1 to 6 above, the Ld. AO erred in concluding that the income earned by the Appellant is in the nature of 'FTS', without appreciating the fact that the Company has deposited Equalization Levy (EL) on such income and accordingly eligible for claiming exemption under section 10(50) of the Act. 8. Without prejudice to the above grounds, the interest computed under section 2348 of the Act is consequential in nature and would undergo change on the basis of relief provided in the aforesaid grounds of appeal. 9. The Ld. AO erred in initiating the penalty proceedings by issuing notice under section 274 read with section 270A of the Act for under reporting of income by way of misreporting.

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3.

During proceedings before us the Ld. Counsel for the assessee submitted that the appeal on ground No.1 and 2 are not pressed. Accordingly, appeal on these two grounds are dismissed as not pressed. 4. It was further submitted that the appeal on ground Nos. 3, 4 and 5 are squarely covered by the order of the coordinate Bench of the ITAT in assessee’s own case for A.Y. 2019-20, 2020-21 and 2021- 22. 5. It was also brought on record that the appeal filed before Hon’ble Delhi High Court by the revenue was also dismissed by the jurisdictional Hon’ble Delhi High Court in its order dated 11.07.2024 on the same issue in assessee’s own case. 6. We have gone through the orders of the coordinate Benches of the Tribunal in assessee’s own case and we have also seen the order of the Hon’ble Jurisdictional Delhi High Court in revenue’s appeal against the order of the ITAT. We find that the orders passed by the ITAT coordinate Benches squarely cover all the issues raised by the assessee in this case in assessee’s favour on same issue. On same issues the revenue preferred appeal before the Hon’ble Delhi High Court which was dismissed by the Hon’ble Jurisdictional High Court. Keeping in view the facts narrated above in assessee’s appeal on same issue raised by the assessee in ground No.3,4,5 and 6 are allowed. The ground No. 7, 8 and 9 are consequential in nature.

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7.

In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the Court on 28.07.2026.

Sd/- Sd/-Sd

(VIKAS AWASTHY) (KRINWANT SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBR Dated : 28/07/2026 *Neha Sr. PS* Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI

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