ACIT, NEW DELHI vs. AEDAS PTE. LTD., SINGAPORE

PER VIKAS AWASTHY, JUDICIAL MEMBER: These bunch of seven appeals by the Department for AY 2016-17 to 2022-23 involve identical issues, therefore, these appeals are taken up together for adjudication and decided by the single order.

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. 9(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and Article 12 of the India-Singapore Double Taxation Avoidance Agreement (DTAA). The second issue which arises for consideration in the appeals for A.Ys. 2018-19 to 2022-23 is with regard to the assessee having Virtual Service Permanent Establishment (VSPE) in India.

“1. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of $12,58,30,845/- made by the Assessing Officer, ignoring that the receipts are taxable in India as Fees for Technical Services (FTS) under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-Singapore DTAA. That the Ld. CIT(A) has erred in holding that the assessee's services do not "make available" technical knowledge, experience, skill or know-how, overlooking that the assessee developed and transferred detailed technical plans/designs which are capable of further application in construction projects in India. 2. That the Ld. CIT(A) has failed to appreciate the contractual clauses transferring ownership and intellectual property rights in the architectural plans/designs to Indian clients, which establish that technical expertise was transmitted and made available to the clients. That the Ld. CIT(A) has erred in disregarding the AO's detailed findings and remand report, wherein it was established that the assessee's services were all- encompassing, technical in nature, and enabled Indian clients, through local architects, to apply the technical knowledge contained in the deliverables. 3. That the Ld. CIT(A) has erred in relying selectively on judicial precedents favourable to the assessee, while ignoring binding and relevant precedents such as Mahindra & Mahindra Ltd. (SB), Foster Wheeler France SA, and US Technology Resources Pvt. Ltd., which support the Revenue's stand. 4. That the Ld. CIT(A) has erred in holding that the receipts are not taxable as royalty under Article 12 of the India-Singapore DTAA, without properly appreciating that the assessee transferred rights in designs/drawings which constitute intellectual property. 5. That the Ld.CIT(A) failed to appreciate that the service PE is constituted in India as the employees of assessee were physically present in India for duration of 82 man days and 61 solar days, moreover the services were provided virtually continuously through the duration of the project, as it is seen from the contract agreement.”

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. 5. The facts of the case in brief as emanating from documents on record are: The assessee is a tax resident of Singapore. The assessee is engaged in rendering project-specific architectural design services. The architectural designs are executed in Singapore. During the period relevant to the assessment year under appeal, the assessee received fee of Rs.12,58,30,845/- towards technical services, i.e., architectural design services. The said receipts were claimed as non-taxable in India by the assessee under Article 12 of the India-Singapore DTAA, hence, the same were not offered to tax. The TDS deducted on the aforesaid payments received by the assessee was claimed as refund. In assessment proceedings, the AO held the amount received by the assessee from Indian customers as taxable in India as FTS, taxable at the rate of 10% as per the India-Singapore DTAA. In the alternate, the AO held that the amounts received by the assessee are taxable as royalty income. Further, the AO held that there exists a service Permanent Establishment (PE) of the assessee in India. The AO, in the assessment order, recorded that the employees of the assessee were physically present in India for a duration of 82 man days and 61 solar days, however, the services were provided virtually. Aggrieved by the assessment order dated 26.11.2025, the assessee carried the issues in appeal before the CIT(A), inter alia assailing action of the AO in holding receipts on account of architectural design services as FTS and also as royalty on alternate basis. The assessee also assailed findings of the AO in holding that the assessee has VSPE in India. The First Appellate Authority, vide impugned order dated 29.09.2025, allowed appeal of the assessee overturning findings of the AO in treating the receipts as FTS/royalty. The CIT(A) followed the order of the Tribunal in assessee’s own case for A.Y. 2015-16 in ITA No.716/Del/2020 decided on 10.07.2023.

With regard to assessee having VSPE, the CIT(A) followed the order of the Tribunal in the case of Clifford Chance PTE Ltd. vs. ACIT, 180 taxmann.com 424 and held that since employees of the assessee were not 3

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. physically present in India for a period of more than 90 days, the assessee has no service PE in India. Against the said findings of the CIT(A), the Revenue is in appeal before the Tribunal.

“1. In M/s Aedas Pte Ltd, AY 2018-19, AO has provided detailed discussions on whether the clauses in the India-Singapore DTAA on taxation of FTS which is highly restrictive is met or not. The definition of FTS under Article 12 of the India-Singapore DTAA is reproduced below: 4.The term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. For the purposes of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person. In this case in para 5.2 of the assessment order, AO has clearly brought out that there is a local architect who is appointed by the client. Now it can be seen that Article 12(4) clearly states that the services can be delivered through agent, nominee or transferre of such person. In this case associate architects are appointed by the client only and hence technology transfer has happened and hence clause b and c of the Article 12(4) itself is met. Para 5.3 clearly brings out the fact the assessee is working in close coordination with the client appointed local architect, structural consultant, MEP services consultant who then acquire the knowledge and provide the architectural schematic design. Even in this 4(b) is also met since the assessee is transferring all the technical knowledge, experience, skill, know-how and processes which enables the client's agents such as local architects who acquire the services wherein technology is contained and they

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. create the final plan/structure. Here the appointment of the local architects is the distinction which is not present in any other case laws quoted by the assessee. 2. In ITA No.1584/DEL/2025 (A.Y.2018-19),International Bridge Technologies Middle East DMCC, the issue of whether architectural plans/designs for bridges was to be considered as royalty or FTS came up before the Hon'ble ITAT. Para 7.10 is relevant here 7.10 Further, the Appellant placed reliance on the following extract form the commentary to the Organization for Economic Co-operation and Development (OECD) Model Convention [2010 version] : "10.2 A payment cannot be said to be "for the use of, or the right to use" a design, model or plan if the payment is for the development of a design, model or plan that does not already exist. In such a case, the payment is made in consideration for the services that will result in the development of that design, model or plan and would thus fall under article 7. This will be the case even if the designer of the design, model or plan (eg. an architect) retains all rights, including the copyright, in that design, model or plan. Where, bowever, the owner of the copyright in previously-developed plans merely grants someone the right to modify or reproduce these plans without actually performing any additional work, the payment received by that owner in consideration for granting the right to such use of the plans would constitute royalties" 14. The Hon'ble Delhi High Court in the case of CIT vs. DCM Ltd. (supra), has held that where by virtue of agreement there is complete transfer of technology and knowhow albeit on a non-exclusive basis, the consideration received for such transfer of technology is not in the nature of royalty. To fall within the four corners of Article 13(3), the right conferred should be usage; anything more than that, takes it outside the ambit of definition of royalty provided under DTAA. Hence, the remittances made for outright transfer of title in design and drawings, data, etc., would not fall in the definition of 'royalty as per Article 13(3) of DTAA. Based on the above judgement, the above services may fall under the FTS clause. Since the existence of local agents proves that the transfer of technology has indeed happen, the transactions satisfy the test of much more restrictive clause under the India-Singapore DTAA. 3. The AO has also treated the existence of Service PE in para 12 to 18 is relied upon.” 7. Shri Arun Bhadauria, appearing on behalf of the assessee submits that the assessee is providing design services to customers in India, wherein ownership of the designs vests with the customers and the same are to be used only for the project for which the designs are made. The AO has erred in coming to the conclusion that the amounts received by the assessee from customers in India for outright sale of designs constitute FTS/royalty or, in the alternate, business receipts on account of VSPE in India. The ld. Counsel submits that the issue of taxability of architectural design services as FTS/royalty is squarely covered by 5

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. the decision of the Tribunal in assessee’s own case for A.Y. 2015-16 in ITA No.716/Del/2020 decided on 10.07.2023. The facts in the impugned assessment years are identical.

Taxability of receipts for providing Architectural Design Services:

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. “7.1 It is an undisputed fact that the assessee is a tax resident of Singapore and does not have a permanent establishment in India. Hence it has opted to be governed by the provisions of the India-Singapore DTAA being more beneficial to it. 8. Article 12(4) of India-Singapore DTAA reads as under:- “Article 12 Royalties And Fees For Technical Services 4. The term “fees for technical services” as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services:- (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. For the purposes of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person.” 9. From the above, it is apparently clear that a mere rendering of technical service is not roped in the purview of Article 12(4)(c) unless the person utilising such services is enabled to apply the technology contained therein. It is a matter of fact that the assessee has rendered project specific architectural design services to its customers in India which services require highly technical expertise and hence these services partake the nature of technical services. It is however the case of the assessee that though the assessee has rendered technical services to its clients in India in terms of Article 12(4) of India- Singapore DTAA, it has not ‘made available’ any technical knowledge and skill etc. to its Indian clients and hence it falls within the exception clause embedded in Article 12(4)(c) of the India-Singapore DTAA and thus the impugned payments received by it could not be taxed as FTS. 9.1 The assessee provides architectural design services which are project specific. These services involve creation of designs and architectural drawings and prints which are as per the requirement of its Indian customers and specific to a particular project. Thus the assessee is rendering technical services and is engaged in the development and transfer of technical plans or technical designs so as to satisfy the first limb of Article 12(4)(c) of the India-Singapore DTAA. What is now left to be examined is that whether the architectural design services rendered by the assessee would enable its Indian customers to apply the technology contained in such architectural designing services. 7

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. 9.2 In the case of Forum Homes (P) Ltd. (supra) the Mumbai Bench of the Tribunal analysed the applicability of Article 12(4) of the India-Singapore DTAA involving similar issue on similar fact pattern as that of the assessee. In this case, the assessee, a resident company was developing a residential project in India and had availed architectural services from three non resident entities located at Singapore and paid fees to these non resident entities in consideration thereof. The Tribunal held that conditions of Article 12(4) of the India-Singapore DTAA were not fulfilled and the said fee could not be qualified as FTS since while providing architectural services neither any technical knowledge, skill, experience, know-how etc. was made available for utilising them in future independently nor any developed drawing or design have been provided to the assessee which could be applied by the assessee independently. The relevant observations and findings of the Tribunal is reproduced below:- “9. A reading of article 12(4) of the tax treaty would make it clear that payment made to a resident of one of the contracting state can be regarded as FTS, if, in course of providing managerial/technical or consultancy services, technical knowledge, experience, skill, knowhow or processes is made available which enables the person acquiring such services to apply the technology contained therein. It further provides, if the services consist of development and transfer of a technical plan or technical design, but excludes any services that does not enable the person acquiring the service to apply the technology ITA 5804/Mum/2018 contained therein would not qualify as FTS. In the facts of the present appeal, the payments made and the nature of services rendered are as under:- Sr. No. Name of the Country Amount (Rs.) Nature of party services 1. Arc Studio Singapore 2,85,35,269/- Architectural Architectural drawing / Architecture design + in relation to Urbanism Pte BKC project. Ltd 2. Web Singapore 68,57,342/- GFC drawing Structures design in Pte relation to Ltd BKC project 3. RMR Singapore 12,24,464/- MEP drawing Engineers Pte design in Ltd relation to BKC project 10. Thus, as could be seen, the scope of work is limited to various types of drawings and designs for the residential project being developed at BKC. On further verification of facts on record, it is evident that insofar as Arc

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. Studio Architecture + Urbanism Pte Ltd is concerned, it will provide an illustrative site/roof plan showing all the components of the project, general landscape, recommendation and overall infrastructure elements, such as, entry driveways and service circulation, Diagram showing each of the major public at 1:200 scale, image board to describe the architectural character of the project etc. The scope of work also requires the entity to prepare schematic design drawings, approved by the client, in case of minor adjustment. The terms of the agreement make it clear that the design, drawing, rendering, model, specification, electronic files including database and spreadsheets and other derivation that are part of the ITA 5804/Mum/2018 project will remain the intellectual property of the service provider and are intended for use solely with respect to the project. It further restrains the assessee from utilizing such intellectual property for any other project or for addition to the subject project or for completion of the project by any other entity. Similar is the scope of work and terms and conditions in respect of Web Structures Pte Ltd, another non-resident entity. 11. Thus, from the nature of services provided by the non-resident entities and the terms and conditions under which it was provided, it is clear that whatever services were provided are project specific and cannot be used for any other project by the assessee. Further, while providing such services neither any technical knowledge, skill, etc is made available to the assessee for utilizing them in future, independently nor any developed drawing or design have been provided to the assessee which can be applied by the assessee independently. Thus, it is very much clear, the conditions of article 12(4) of the tax treaty are not fulfilled. 12. Though, the Assessing Officer has generally observed that in course of providing services to the assessee, the non-resident entities have made available technical knowledge, knowhow, processes to the assessee. However, no substantive material has been brought on record by him to back such conclusion. Even, before us, learned departmental representative has not brought any material to demonstrate that conditions of article 12(4) have been fulfilled in the facts of the present case. In view of the aforesaid we do not find any valid reasons to interfere with the decision of learned Commissioner (Appeals). Accordingly, we uphold the order of learned Commissioner (Appeals) on the issue by dismissing ground raised.” 9.3 We have also perused the order of the Ld. CIT(A) and find that the Ld. CIT(A) has analysed the impugned issue in great detail and recorded his findings after considering all the material details and documents involving party-wise agreements sample emails reflecting the delivery of services, duration of project party-wise on sample basis etc. for evaluating the true nature of services rendered by the assessee and held that these services would not partake the character of FTS in terms of Article 12(4) of India Singapore DTAA. The findings of the Ld. CIT(A) remain uncontroverted by the Revenue. We therefore, find no reason to interfere with the order of the Ld. CIT(A).

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. xxx 11.2. It is evident from the above that the Ld. CIT(A) has considered this issue in an exhausted manner and after considering the facts of the assessee's case in the light of the decisions in the case of Gera Developments P. Ltd. (supra) and Devi Ashmore India Ltd. (supra) held that payments made to the assessee in consideration of architectural design services could not be classified as royalty under Article 12(3) of India-Singapore DTAA. Hence, we do not find any reason to interfere with the findings of the ld. CIT(A) and accordingly dismiss ground No. 3 of the Revenue.” [Emphasized by us] 11. The Revenue has not been able to point any change in the factual matrix in the impugned assessment years. The First Appellate Authority in the impugned orders for the respective assessment years under appeal has followed the order of Tribunal in assessee’s own case for AY 2015-16. We see no error in the impugned order, hence, the findings of the CIT(A) for the respective assessment years on the issue is upheld. Accordingly, the grounds raised by the Revenue on this issue are dismissed.

Virtual Service PE in India

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. carried the issue in appeal before the Hon’ble High Court. One of the substantial question of law for consideration before the Hon’ble High Court in appeal was:

“B. Whether on the facts and in the circumstances of the case, and in law, the Tribunal erred in holding that the assessee does not have a virtual service permanent establishment in India?”

The Hon’ble High Court after examining the provisions of India- Singapore DTAA answered the above question as under:-

“41. Another issue that has been raised is that even when the employees were not physically present in India, services continued to be rendered virtually, for more than 90 days. That apart, in AY 2021-22, though the assessee did not have physical presence of any employees in India, services were still provided virtually by the assessee to its clients in India, and as such, it constituted a virtual service permanent establishment in India. The view of the assessing officer, as propounded by the Revenue before the Tribunal and before us, is that as a result of rapid digitalisation, services including consultancy services can be provided virtually without the physical presence of employees in the contracting state. According to them, nothing in the DTAA requires the employees to be physically present in India for providing the services. 42. Article 5(6)(a) of the DTAA reads “An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services… within a Contracting State through employees or other personnel …”. The words “within a Contracting State” and “through employees or other personnel” contemplates rendition of services in India by the employees of the non-resident enterprise, while mandating a fixed nexus; a physical footprint within India. The term „within‟ has a certain territorial connotation and in the absence of personnel physically performing services in India, there can be no furnishing of services „within‟ India. A plain reading of the whole provision would thus reveal that, it such rendition of services by employees present within the country which would constitute a service permanent establishment. 43. Mr. Rai has vehemently contended that receipts on account of virtual services rendered by the assessee must be held to be amenable to taxation in India, since a „virtual service permanent establishment‟ has been established. We find that no such eventuality is contemplated by the DTAA. The concept of a virtual service permanent establishment does not find mention anywhere in the DTAA. In the absence of any such provision, the argument of Mr. Rai would be at variance that the express provisions of the DTAA which we have already interpreted above.

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. 44. At this juncture, we find it necessary to acknowledge that the Revenue may potentially be justified in raising concerns regarding taxability of foreign entities in the increasingly open global virtual economy, and the diminishing requirement of physical presence of non-resident employees to furnish services. However, taxability of entities in such instances, as always, remains subject to the applicable provisions of law- both treaty and domestic. 45. The law insofar as the present controversy is concerned, is clear and unambiguous. The DTAA, which has been carefully drafted and executed after numerous rounds of bilateral deliberations and negotiations at the highest level, must necessarily be interpreted strictly. If something is conspicuous by its absence, the presumption is that it has deliberately been done so. It is not for courts to read in concepts which are not expressly provided for by the treaty. The guiding principle here is that language which is not explicitly included in treaty provisions cannot be artificially read into such provisions by way of judicial fiction. 46. As already stated, Article 5(6) of the DTAA only contemplates rendering of services by employees present within the country. If that be so, it is not for this Court to analyse the status or merits of a virtual service permanent establishment which does not find mention either in the DTAA or in the domestic Act. As such, the contention of the Revenue that a virtual service permanent establishment of the assessee has been established for AYs 2020-21 and 2021-22 cannot be accepted.” (Emphasized by us) 13. The Article 5(6) of India-Singapore DTAA only contemplates rendering of services by employees present within the country, concept of VSPE does not find mention in DTAA. The DTAAs are signed between two sovereigns and partake the character of statute after notification. Thus, what is not present in the DTAA cannot be artificially inserted into the provision of DTAA by the Department.

ITITA Nos. 34, 35, 44 to 47 & 50/DEL/2025 AEDAS PTE. LTD. 15. The appeals of Revenue on both the issues fail. In the result, appeals of the Revenue for AY 2016-17 to 2022-23 are dismissed.

Order pronounced in the open court on Friday the 15th day of May 2026. Sd/- Sd/- SANJAY AWASTHI VIKAS AWASTHY ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi Dated: 15-05-2026 NV

Copy to:

ACIT, E-2 BLOCK, CIVIC CENTRE, NEW DELHI, 1 NEW DELHI-110002, DELHI

AEDAS PTE. LTD., 12-07, THE METROPOLIS TOWER 2, 11 2 NORTH BUONA VISTA DRIVE, SINGAPORE, SINGAPORE-138589, SINGAPORE 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE