FIREEYE IRELAND LIMITED,IRELAND vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(3)(1), INTERNATIONAL TAXATION, NEW DELHI, NEW DELHI

ITITA 1431/DEL/2025Status: DisposedITAT Delhi30 September 2026AY 2022-202315 pages
AI SummaryAllowed

What were the facts?

The assessee, FireEye Ireland Limited (FIL), an Irish tax resident, appealed against the final assessment order dated January 16, 2025, passed by the Assistant Commissioner of Income Tax for Assessment Year 2022-2023. The order, based on directions from the Dispute Resolution Panel, treated INR 52,06,95,065 received from software sales and related services as Fees for Technical Services (FTS) and INR 4,97,73,79,939 from the transfer of ownership in FE LLC as capital gains taxable under Article 13(5) of the India-Ireland Double Taxation Avoidance Agreement (DTAA). The total income was assessed at INR 562,93,02,990, resulting in a demand of INR 75,27,76,170. FIL claimed no physical presence or Permanent Establishment (PE) in India and that the income from software sales was not taxable in India, citing Supreme Court and High Court decisions. The capital gains were claimed as not taxable under Article 13(6) of the DTAA.

What did the Tribunal hold?

The Tribunal held in favor of the assessee on both issues. Regarding the first issue, concerning the taxation of software sales as FTS, the Tribunal noted that a co-ordinate bench had previously decided in the assessee's own case for AYs 2020-21 and 2021-22 that consideration from software offerings is not taxable as FTS in India. The Ld. DR failed to present any substantial difference in facts or arguments to counter this. Therefore, the Tribunal held that the consideration from software sales and related support is not taxable as royalty or FTS under the Act and the India-Ireland DTAA, sustaining grounds 2 to 4 in favor of the assessee. On the second issue, concerning capital gains, the Tribunal found that the ordinary meaning of 'alienation' in Article 13(6) of the DTAA should be adopted, and domestic law deeming fictions, such as Explanation 5 to Section 9(1)(i) of the Act, cannot be read into the treaty to expand its scope. Citing decisions like DIT v. New Skies Satellite BV and Sofina S.A., the Tribunal held that the transfer of ownership in FE LLC does not trigger Indian tax liability under Article 13(5) of the DTAA. It also noted that no case of treaty abuse was established with evidence, and the invocation of MLI provisions was on an incorrect basis. Consequently, the capital gains were held not taxable in India under Article 13(5) of the India-Ireland DTAA, sustaining the corresponding grounds in favor of the assessee.

What were the issues?

1. Whether the consideration received from the sale of software and related services amounting to INR 52,06,95,065 is taxable in India as Fees for Technical Services (FTS) under the Income Tax Act, 1961, and the India-Ireland DTAA. - Assessee's contention: The income from software sales is not taxable in India, citing decisions in Engineering Analysis (SC) and SFDC Ireland Limited (Delhi HC). It should not be treated as FTS, referencing Kotak Securities Ltd. (SC). - Revenue's contention: Not recorded. 2. Whether the capital gains of INR 4,97,73,79,939 arising from the transfer of ownership in FE LLC are taxable in India under Article 13(5) of the India-Ireland DTAA. - Assessee's contention: The gains are not taxable in India as per Article 13(6) of the DTAA, as the alienation of shares in FE LLC does not trigger Indian tax liability. Reliance is placed on DIT v. New Skies Satellite BV (Delhi HC) and Sofina S.A. (Mumbai Trib.), arguing that deeming fictions in domestic law (Explanation 5 to Section 9 of the Act) cannot override treaty provisions and that the term 'alienation' in the treaty should be interpreted ordinarily, not expanded by domestic law definitions. - Revenue's contention: The transaction resulted in an indirect transfer of shares of an Indian company (Mandiant Cybersecurity Private Limited) through the transfer of FE LLC, making it taxable under Explanation 5 to Section 9 of the Act, subject to DTAA relief under Section 90. The AO invoked Article 6 of the Multilateral Instrument (MLI) and argued that Section 90 is for avoiding double taxation, not double non-taxation, and that the transaction was an abuse of the tax treaty.

Which sections of the Income-tax Act were involved?

Section 144C(5),Section 90,Section 9(1)(i),Section 2(47)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI KRINWANT SAHAY

Pronounced: 30.09.2026

PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER:

This appeal is preferred by the assessee against the order dated 16.01.2025 passed by the Ld. Assistant Commissioner of Income Tax, Circle, 1

ITITA 1431/DEL/2025 FIREEYE IRELAND LIMITED

International Tax -1(3)(1) (hereinafter referred as

The order continues below.

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