Loading judgment…
Facts
The assessee, a Singapore tax resident, sells software products to customers in India. The Assessing Officer (AO) treated receipts from IT support and maintenance services as 'fees for technical services' taxable in India, contrary to the assessee's claim of exemption. The Dispute Resolution Panel (DRP) upheld the AO's view.
Held
The Tribunal held that the issue was identical to previous years where ITAT Pune had decided in favor of the assessee. Following the principle of judicial discipline and precedence, the Tribunal found that income from IT Support services, even if viewed independently, is not chargeable to tax.
Key Issues
Whether income from IT support and maintenance services provided to Indian customers constitutes 'fees for technical services' taxable in India, considering the India-Singapore DTAA and previous ITAT rulings.
Sections Cited
143(3), 144C(13), 144C(5), 144C(1), 274, 270A, 9(1)(vii), 115A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “C” :: PUNE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by assessee against the Assessment Order under section 143(3) r.w.s 144C(13) of the Act, 1961 dated 26.12.2024 for A.Y.2022-23 emanating from Dispute Resolution Panel’s order passed under section 144C(5) of the Act, dated 12.11.2024 and Draft Assessment Order passed under section [A] 144C(1) of the Act, dated 20.02.2024. The Assessee has raised the following grounds of appeal : “I Erred in considering the receipts on account of support and maintenance services to its customers in India as liable to tax in India
The learned AO has erred on facts and in circumstances of the case and in law in considering the receipts of INR 33,13,39,754 from support and maintenance services rendered in relation to sale as fees for technical services under the India-Singapore DTAA as well as under the Act and liable to tae in India
III Other grounds of appeal
1. Initiation of penalty proceedings under section 274 read with section 270A of the Act
The learned AO has erred on the facts and in circumstances of the case and in law in proposing to Initiate penalty proceedings against the Appellant under section 274 r.wis 270A of the Act considering the receipts of INR 33,13,39,754 from support and maintenance services rendered in relation to sale as liable to tax in India.
The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Honourable income-tax Appellate Tribunal to decide this appeal according to law.”
Findings & Analysis : 2. We have heard both the parties, perused the records. Assessee is Tax Resident of Singapore and it is engaged in selling Software Products to end use customers, including customers in India. It is 2 [A] mentioned in the Assessment Order that Assessee has also provided IT Support and Maintenance Services with reference to such software’s sold to customers. Assessee filed Return of Income for A.Y.2022-23 on 29.10.2022 declaring total income at Rs.9,41,61,013/- and claimed income of Rs.81,71,28,884/- as Exempt Income.
In the Draft Assessment Order, the Assessing Officer held that an amount of Rs.33,13,39,754/- received on account of IT Support and Maintenance Services was “fees for technical services” under section 9(1)(vii) of the Act read with Article 12 of India Singapore DTAA.
3.1 In the Draft Assessment Order, Assessing Officer held as under : “8.0 The rate to tax for „Fees for Technical Services‟ as per India- Singapore DTAA is @ 10% and the corresponding rate in the Income Tax Act, 1961 in Section 115A of IT Act, 1961 is @10% plus applicable surcharge and education cess and, thus as per Article 12 of the India- Singapore DTAA i.e. @10%.”
Aggrieved by the Draft Assessment Order, Assessee filed objections before Dispute Resolution Panel(DRP). Assessee submitted before DRP an elaborate submission. Assessee also 3 [A] submitted before DRP that the issue is covered in favour of Assessee by ITAT Pune’s Order in Assessee’s own case for A.Y.2018-19, A.Y.2019-20, A.Y.2020-21 and A.Y.2021-22. This fact is mentioned in para 1.5 of the DRP’s order.
4.1 DRP upheld the Draft Assessment Order, relevant paragraphs are reproduced here as under : “5.3 Discussion of the Issue by DRP:
We have considered the facts of the case, submission of assessee and arguments during the DRP proceeding. Panel finds that this is a recurring issue as the assessee has raised similar ground of objection before the DRP for AYs 2018-19, 2019-20, 2020-21 and 2021-22.
………………………….
5.4 Directions of the DRP:
We find that the issue involved is pari materia the same as those of earlier years and DRP had decided this issue in the AY 2021-22. We find that there is no substantial change in material facts during the year under reference. Therefore, we see no reason to deviate from the decision of DRP on the issue in earlier years. Accordingly, Ground of Objection No.1 of the assessee is hereby rejected.”
4.2 Then, the Assessing Officer passed Final Assessment Order dated 26.12.2024 under section 143(3) r.w.s 144C(13) of the Act.
[A] Aggrieved by the Final Assessment Order, Assessee filed appeal before this Tribunal.
At the outset, ld.Authorised Representative(ld.AR) filed a paper book containing ITAT Pune’s Order in Assessee’s own case for A.Y.2018-19 to A.Y.2021-22. Ld.AR read out the relevant paragraphs of the ITAT’s order and DRP’s order. Ld.AR submitted that the issue is decided by ITAT Pune in Assessee’s own case in favour of Assessee. Ld.AR further submitted that as per the rule of precedence, it was mandatory for DRP to follow the decision of ITAT in earlier years. Ld.AR relied on the decision of Hon’ble Bombay High Court in the case of Mercedes Benz India Private Limited vs. Union of India and Others in Writ Petition No.1614 of 2010 vide order dated 17.03.2010, wherein Hon’ble High Court has elaborately explained judicial discipline and rule of precedence.
Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the DRP and Assessing Officer. Ld.DR submitted that for A.Y.2022-23, the Assessing Officer has mentioned that services provided by Assessee are covered by Clause 4(b) of Article 12 of DTAA. Ld.DR further submitted it is specifically mentioned in the Assessment Order that the services are such which the 5 [A] customers will be enabled to use on their own. The ld.DR submitted that in the Assessment Order, Assessing Officer has stated as under: “Thus, customer can use the software of the assessee even after discontinuing the support services. This demonstrates that the customer is enabled to use the technology provided by the assessee and is not dependent on the assessee to use the technology provided by it. This again shows that the services provided fit into the definition of „make available‟ clause as required by the DTAA.”
We specifically asked ld.DR for the Revenue that once DRP in its order for A.Y.2022-23 has mentioned that the issue is same for A.Y.2022-23, A.Y.2019-20 and A.Y.2020-21, why the ITAT decision in Assessee’s own case for A.Y.2019-20, A.Y.2020-21 and A.Y.2021-22 shall not be applicable! Ld.DR for the Revenue could not answer.
ITAT Pune in Assessee’s own case in for A.Y.2018-19 vide order dated 15.07.2022 has held as under : “11. Once it is held that the amount received by the assessee for providing the IT Support services does not fall under para 4(a) and also misses the prescription of para 4(b). the same ceases to be FTS. The same way in which income from sale of software license in the present case broadly falls under para 3(a) of Article 12 but has been held by the DRP to not satisfy the condition of taxability, income from Support and Maintenance charges of the licensed software also largely fall under para 4(a & b) but fail to magnetize taxability within its purview. 6 [A] 12. The DRP has arrived at the conclusion of taxability of IT Support service charges as FTS by distinguishing the earlier years' tribunal orders. It held that the Tribunal did not separately examine the nature of Support services charges de hors receipts on account of software licenses and proceeded to treat both as software royalty. Firstly, the DRP in the earlier orders did not draw any such distinction and held the entire amount as chargeable to tax as royalty in the light of the decision in Samsung (supra). When the matter came up before the Tribunal, the decision in Engineering Analysis (SC)(supra) had been delivered by then, based on which the decision of the AO, treating the composite amount as royalty was reversed. When neither the AO nor the DRP had treated the two streams of income as separate from each other, having different connotation in terms of the DTAA, there could have been no question of the Tribunal setting up a new case. Be that as it may, we have eloquently discussed the issue above and reached the conclusion that the income from IT Support services, even if viewed independent of software license income, is not chargeable to tax. The impugned order is, ergo, overturned and the addition of Rs.42.42 crore and odd is directed to be deleted.”
8.1 ITAT in Assessee’s own case in ITA No.1285/PUN/2023 has allowed assessee’s appeal on this issue.
Since as mentioned by DRP that facts of the present case are identical to facts in A.Y.2018-19, A.Y.2019-20, A.Y.2020-21 and A.Y.2021-22, the judicial discipline mandates us to follow decision of ITAT in for A.Y.2018-19.Respectfully 7 [A] following the ITAT Pune Bench’s decision in Assessee’s own case, the Ground No.I raised by the assessee is allowed.
Ground No.III(1) is related to penalty which is consequential, hence dismissed as premature. Accordingly, Ground No.III(1) raised by the Assessee is dismissed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 09 October, 2025.