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TMI Blog2023 (8) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be attributed to the PE are from sale of software licence, however, as could be seen from the facts on record, the transfer of licence takes place, once, the licence key is generated and made available to the licencee after execution of the contract. Insofar as the receipts from provision of services, undisputedly, the assessee has offered them to tax. Though,DR has alleged before us that the licence agreement was executed in India contrary to the claim of the assessee, however, no documentary evidences has been brought to establish such facts. Thus, we are of the view that the Revenue has failed to establish on record through credible evidence that the assessee has a fixed placed PE in India through which it has earned the income relating to sale of software licence. Therefore, in our considered opinion, no part of such income can be attributed to the PE. Grounds are disposed of accordingly. Taxability of amount offered towards FTS/FIS - Undisputedly, in the returns of income filed for the impugned assessment years, the assessee has suo motu offered the income received from the services rendered as FTS/FIS under Article 12(4) of India USA DTAA. It is the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the Assessing Officer called upon the assessee to furnish the details of all Associated Enterprises (AEs) in India and the international transactions entered with them in the relevant assessment years. He also called upon the assessee to furnish copy of Audit Report in Form 3CEB as well the agreements entered with the AEs in India. He also called upon the assessee to furnish details of employees visiting India for providing services in the relevant assessment years. 4. In response to the queries raised by the Assessing Officer, the assessee furnished the details called for. From the details furnished by the assessee, the Assessing Officer noticed that in the relevant assessment years, 30 employees of the assessee visited India for a period of 459 days and rendered services. Further, in course of assessment proceedings, the Assessing Officer in exercise of powers conferred under section 133(6) of the Act sought information from the assessee s AE in India, i.e., Automation Anywhere India Pvt. Ltd. On going through the information furnished by the AE, the Assessing Officer observed that various employees of the assessee are working for long duration at the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for marketing, events and activities, where the visiting employees did not access or visited the premises of the Indian AE. Rather, they were staying at hotels, where the meetings and conferences held. He submitted, 4 visits were for 108 days for imparting training. He submitted, 5 visits for 107 days were wrongly included in the list of visits by employees, as, one employee came to India for marriage and other visits were either cancelled or terminated. In this context, he drew our attention to the relevant documents/evidences placed in the paper-book. He submitted, on an average, each employees visited for less than 14 days in a year. 8. He submitted, the visiting employees were given temporary space for meeting with the employees of the Indian AE and they did not carry out any core business activities of the assessee in the premises of the AE. In this context, he drew our attention to the submissions made before the Assessing Officer. He submitted, the visiting employees had no legal rights or effective powers over the office of Indian AE. Nor they had any right to organize meetings in the premises of the AE. He submitted, the visiting higher officials of the assessee, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the RPO software from the premises of Indian AE. Rather, the assessee furnished evidence to demonstrate that RPA software licences were sold from outside India and payments were also made outside India. Thus, he submitted, enough evidences were furnished by the assessee to demonstrate that the conditions of Article 5(1) of India USA DTAA are satisfied. He submitted, a fixed place of business would mean, where the entity is free to use the premises at any time of his own choice for work relating to more than one customer and for his internal administrative and bureaucratic work. In this context, he drew our attention to the decision of the Hon ble Supreme Court in case of Formula 1 World Championship Ltd. Vs. CIT, (2017) 394 ITR 80. 11. Proceeding further, he submitted, in case of Asstt. DIT v. EFunds IT Solutions Inc. [2017] 399 ITR 34 (SC), the Hon ble Supreme Court has held that the burden of proving that the foreign entity has a PE in India and must, therefore, suffer tax from the business generated from such PE, is initially on the Revenue. He submitted, the findings of the Assessing Officer with reference to fixed placed PE is based on preponderance of probabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US B.S Visual Designer Provide guidance on technical standards Jayaraman Balasubramanian US MBA VP of Product Management in 2017; Is now SVP of Product Management Assess and review documentation processes Jon Stueve US M.S. Manager, Automation Anywhere Training Set-up training Jonathan Malkin US B.S. lead, Sales Engineering Assist with setting-up sales engineering function at India level Joseph Crowley US B.S. Regional Sales Director To receive sales training Judy -Tran US MBA Director, Renewals Streamline processes in respect of sales operations Kajaai Bhatti US B.S. Senior Marketing Manager (Events) Organising IMAGINE. conference in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Machine Learning Engineer Assist in conducting Demo at IMAGINE conference Zulfikarali Barodawala US B. Sc and MCA Senior Product Manager Assess product issues and provide guidance 13. Without prejudice to the aforesaid submissions, learned counsel submitted that even assuming that the assessee had a fixed place PE, however, if such fixed placed is used for auxiliary or preparatory work, it is excluded from being treated as a PE in terms of Article 5(3)(e) of the tax treaty. He submitted, since, the activities carried on by the visiting employees can at best be classified as auxiliary or preparatory, it has to be concluded that the assessee has no PE in India. He submitted, as per Article 5(2)(i) of the tax treaty, a fixed place used for included or technical services is excluded from being treated as PE. He submitted, the visiting employees, at best, provided technical services. Therefore, there cannot be a PE in terms of Article 5(2)(i) of the tax treaty. Without prejudice to the aforesaid submission, learned counsel submitted that the attribution of profit at 20% ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials on record. The dispute between the parties lies within a narrow compass, as to whether the assessee in the relevant assessment years had any fixed place PE in India in terms with Article 5(1) read with Article 5(2) of the India USA DTAA. The Revenue has set up a case that the employees of the assessee have visited India on regular basis for long duration and performed work from the premises of the Indian AE, AASPL. The Assessing Officer has alleged that all the tests of fixed place PE, viz., the tests of permanency, disposal, duration and functional test stand satisfied. Of course, learned DRP has agreed with the aforesaid view of the Assessing Officer. 17. Before we proceed to deal with this issue, it is necessary to state that the assessee developed RPA software platform based on Artificial Intelligence Technology. In addition to the products sold, the assessee also provides services, either itself or through outsourcing. For the purpose of supply of RPA software platform, the assessee had entered into an End User Licence Agreement (EULA) with ANZ Support Services India Pvt. Ltd., where under, the assessee provides right to use of its RPA software. Parties have also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of the assessee from the premises of AASPL. Thus, in sum and substance, the Assessing Officer has alleged that the premises of AASPL constitutes fixed place PE of the assessee in India. 20. A reading of Article 5(1), which defines fixed placed PE, makes it clear that a fixed place of business through which the business of an enterprise is wholly or partly carried on, can be treated as fixed place of business or PE. Article 5(2) further clarifies that the term PE includes, furnishing of services other than the services relating to royalties and FIS within a contracting state by an enterprise through employees or other personnel subject to conditions of clause (i) and clause (ii). 21. Keeping in perspective the provisions of Article 5(i) read with Article 5(2) of the tax treaty, we have to determine whether any part of the income earned from licence fee can be said to have been earned through the activity of the alleged PE. Undisputedly, the Assessing Officer has stated that in the assessment years under dispute, 30 employees of the assessee have visited India for a total period of 459 days and have utilized the premises of AASPL to carry out the business activities of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with setting-up sales engineering function at India level Joseph Crowley US B.S. Regional Sales Director To receive sales training Judy 'Fran US MBA Director, Renewals Streamline processes in respect of sales operations Kajaal 13hatti US B.S. Senior Marketing Manager (Events) Organising i: PVIAGINE conference in India Kathleen Holmuen US MBA. Member, Board of Directors Meet employees and gain understanding of India operations Manish Rai US MBA and MSEE VP, Product Marketing Assess marketing opportunities at India level Mihir Shukla US B.S. Chief Executive Officer Meet employees review organization Nancy Householder Hauge US B.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not appear that any of the employees visiting Indian were carrying on any activity with regard to sale of licence. Neither from the email dump, nor any other material available on record, it is forthcoming that the employees visiting India were involved in the activity of sale of licence. 23. As could be seen from the details available, the purpose of visit are for shareholder s activity, stewardship activity, marketing events, for receiving training etc. Though, the Assessing Officer has referred to the information received under section 133(6) of the Act from the Indian AE, however, such information nowhere reveals that the assessee was carrying on any activity of sale of licence through its employees by utilizing the premises of AASPL in India. There is nothing on record that could even remotely suggest that assessee s employees were carrying out core business activities, either wholly or partly from the premises of AASPL. 24. On the contrary, from the assessment stage itself the assessee has clarified that its employees had access to AASPL premises only with prior permission. The assessee has further stated that visiting employees were given temporary space for meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to more than one customer, it can use the place of business for internal administrative and bureaucratic work. However, factually the Assessing officer has failed to satisfy any of the aforesaid tests. 26. Facts on record reveal that, though, many of the employees visited India, but there is no evidence to suggest that all of them used the premises of AASPL. Even assuming that all those employees used the premises of AASPL but there is no evidence to suggest that they used the premises for the activity relating to the sale of software. Undisputedly, the receipts, which are sought to be attributed to the PE are from sale of software licence, however, as could be seen from the facts on record, the transfer of licence takes place, once, the licence key is generated and made available to the licencee after execution of the contract. Insofar as the receipts from provision of services, undisputedly, the assessee has offered them to tax. Though, learned Departmental Representative has alleged before us that the licence agreement was executed in India contrary to the claim of the assessee, however, no documentary evidences has been brought to establish such facts. 27. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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