ATTACHMATE CORPORATION,USA vs. ACIT, CIRCLE 1(1)(1), INTERNATIONAL TAXATION, NEW DELHI

ITA 782/DEL/2023Status: DisposedITAT Delhi17 October 2024AY 2020-2111 pages
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What did the Tribunal hold?

The Tribunal found the AO's claim of lack of bifurcation between software updates and support services factually incorrect, as invoices showed separate costs. It was held that the 'make available' condition under Article 12(4)(b) of the India-USA DTAA was not met, as the Revenue failed to prove that technical knowledge, know-how, or skill was transferred to service recipients. Therefore, the receipts are not taxable as FIS under Article 12(4)(b) of the DTAA. For the secondary issue, the AO was directed to verify the assessee's claim and compute interest on refund under section 244A up to the date of issuance of the refund voucher.

What were the facts?

The non-resident assessee, a US corporate entity distributing software products, received amounts from Indian customers for supplying software updates, patches, and on-call support services. The Assessing Officer (AO) treated these receipts as Fee for Included Services (FIS) under Article 12(4)(b) of the India-USA DTAA, taxing them at 10% on a gross basis, and the DRP endorsed this view. The assessee contended that these services, particularly on-call support, do not satisfy the 'make available' condition for FIS and highlighted that past tribunal rulings for similar assessment years held these receipts were not royalty or FIS.

What were the issues?

1. Whether amounts received for software updates, patches, and on-call support services are taxable as Fee for Included Services (FIS) under Article 12(4)(b) of the India-USA DTAA, specifically concerning the fulfillment of the 'make available' condition. 2. Whether interest on refund under Section 244A of the Income-tax Act, 1961, should be computed up to the date of issuance of the refund voucher.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 244A

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Cases cited in this judgment(1)Show list

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

Before: SHRI SAKTIJIT DEY, VICE- & SHRI S RIFAUR RAHMAN

For Appellant: Ms. Samsiha Murgai, CA
Hearing: 03.10.2024Pronounced: 17.10.2024

PER SAKTIJIT DEY, VICE-PRESIDENT Captioned appeals have been filed by the assessee assailing the final assessment order passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short ‘the Act’) pertaining to assessment years 2018-19, 2019-20 and 2020-21 in pursuance to directions of learned Dispute Resolution Panel (DRP).

ITA No.2296 & 2297/Del/2022 & 782/Del/2023

2.

The common substantive issue arising in all these appeals relate to taxability of the amounts received by the assessee from the Indian customers towards supply of software updates and pa

The order continues below.

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