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

The solitary issue that arises for consideration pertains to the taxability of income earned by the assessee from maintenance services and training services as Fees for Technical Services (“FTS”).

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a company incorporated in the Republic of Singapore and is engaged in the business of providing/sub-licensing software to entities in the Financial Service Sector. For the assessment year 2015-16, the assessee filed its return of income on 30/09/2015, declaring a total income

The nature of maintenance services and training services provided by the assessee to its various clients is as follows: - “a) The assessee provides telephone and / or email assistance to the Indian customers during the assessee's normal business hours (9:00 to 18:00 Singapore time, Monday to Friday excluding holidays in Singapore). Such assistance consist of responding to the Indian customer's reasonable questions concerning use of Software program and resolving the discovery of bug. b) In case the assessee is not able to collect enough information for precise diagnosis of the customer's issue or when such diagnosis suggest need for another form of technical assistance, the assessee remotely log in to the customer's system to provide assistance to them. c) The assessee provides basic training to its customers for proper usage of the Software program at mutually agreed time and location. The assessee provides onsite training relating to the basic usage of the software only in case of special conditions and when the customer has specifically requested for onsite presence. d) The assesse also provides from time to time to its Indian customers an update to the Software program which includes correction of errors, improvements concerning the existing functioning of the program or the screens and program changes intended to improve the calculations, results and formulae of the software program.”

During the assessment proceedings, the assessee was asked to show cause as to why the income earned by the assessee from maintenance services and training services should not be treated as FTS and taxed in India. In response, the assessee submitted that the income earned from rendering maintenance services and training services in India is its income from business and thus should not be taxed in India in the absence of Permanent

The Assessing Officer (“AO”), vide order dated 06/02/2018 passed under section 143(3) read with section 144C(3) of the Act, disagreed with the submissions of the assessee and held that the services provided by the assessee are not general in nature and are provided by technical experts/professionals from the field of software and information technology. The AO further held that the assessee is engaged in the business of providing/sub-licensing software to entities in the Financial Service Sector, and during the year under consideration, it provided the training services related to the basic use of its company's software. It was further held that such training services are not routine training services, but are offered on-site in India by the assessee’s personnel who travel for such purpose from its offices in Singapore. Accordingly, the AO held that the technical knowledge, experience, and skill possessed by the assessee with regard to various aspects were made available in the form of advice or services, which were finally used

The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue and directed the AO to delete the addition made on account of maintenance services and training services, following the decision of the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2018-19. The learned CIT(A) further noted that similar conclusions/inferences were drawn by the AO in the assessment year 2018- 19, based on which the impugned addition has been made in the year under consideration by holding the receipts from maintenance services and training services as liable to tax as FTS under the India-Singapore DTAA as well as under the Act. The learned CIT(A) also noted that the facts of the earlier year under consideration before the Tribunal are similar to the instant assessment year, and the assessee has entered into similar standardised agreements with similar clauses with its different customers. Being aggrieved, the Revenue is in appeal before us.

During the hearing, the learned Departmental Representative vehemently relied upon the assessment order. On the other hand, the learned Authorised Representative placed reliance upon the decision of the coordinate bench in the assessee’s own case for the assessment year 2018-19, wherein a similar addition was deleted.

We have considered the submissions of both sides and perused the material available on record. We find that while deciding a similar issue pertaining to taxability of payments received by the assessee from maintenance services and training services, the co-ordinate bench of the Tribunal in assessee’s own case in M/s Murex Southeast Asia Pvt Ltd. v/s DCIT, in ITA No. 2338/Mum./2022, for the assessment year 2018-19, vide order dated 08/05/2022, after considering the relevant clauses of the agreement held that maintenance services and training services provided by the assessee to the Indian customers do not fall within the ambit of FTS under Article 12 of the India-Singapore DTAA as the services do not make available any technical skills, knowledge, or expertise etc., which enables the Indian customers to apply the technology contained therein, and therefore the income of the assessee from rendering the services is not taxable in India. The relevant findings of the Co-ordinate Bench, in the aforesaid decision, are reproduced as follows:– “10. 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 software maintenance. 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 ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 7 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 is expired 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.

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

In the result, the appeal by the Revenue for the assessment year 2015- 16 is dismissed.

In the result, the appeals by the Revenue for the assessment years 2016-17 and 2017-18 are dismissed.

To sum up, all appeals by the Revenue are dismissed. Order pronounced in the open Court on 08/05/2025