9911796707
TMI Blog2024 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Sh. Nageshwar Rao, Adv., Sh. Anshika, Adv. For the Revenue : Sh. Vizay B. Vasanta, CIT-DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order dated 30.10.2023 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. 2. The only issue to be adjudicated in this case is that whether the assessee is satisfying the requirement of the clause of 'make available' as per the India-US DTAA. 3. To determine that, the services provided in lieu of the receipt have been examined. The assessee has provided the following services: a. The Company provides Software on cloud under SaaS model (referred to as "Cloud- based services" or "Subscribed services") i. directly to end-users wherein it grants a non-exclusive, non-transferable, worldwide right to use the Hosted Services, solely for their internal business purposes; and ii. through BPO partner wherein it grants non-exclusive, non-transferable and non-sublicensable right to the BPO partner to resell the automated services to end-users in India. b. The Company also provides (i) certain implementation services to get the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n kick-off (includes project kick-off call to discuss the data collection templates, project overview and targeted go-live date); ii. Data collection (wherein the Company provides data templates and step-by-step instruction guide on the information needed from the Customer's systems); iii. Application configuration and data import (includes determining currency requirements, reconciliation thresholds, email alert configuration, data import from data collection phase, etc.); and iv. Data validation (to ensure that the data that has been imported into the BlackLine application is correct and to verify that all the application settings have been reviewed). v. Implementation services are utilized at the time of onboarding of a new customer or deployment of another standard Software product/another Software module for an existing customer and such services are not rendered throughout the period of provision of Cloud-based services. Once provision of implementation services is completed, the Hosted Services (i.e., the Cloud-based Software) are deployed for the customer which functions automatically without any human intervention. e. The Company provides on-demand recorded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aS model; also referred to as Cloud-based services) 5,30,91,593 1B. Ancillary/ incidental services to the subscription of Software under SaaS model 8,02,094 • Implementation services to get the customer set up in BlackLine Hosted Services 6,49,062 • User Training Total 5,45,42,749 4.2 The assessee has objected to the above proposed addition and his objections are summarized as below: "(i) Nature of services provided during the year a. The Company provides Software on cloud under 5aa5 model (referred to as "Cloud- based services" or "Subscribed services") i. directly to end-users wherein it grants a non-exclusive, nontransferable, worldwide right to use the Hosted Services, solely for their internal business purposes; and ii. through BPO partner wherein it grants non-exclusive, nontransferable and non-sublicensable right to the BPO partner to resell the automated services to end-users in India. b. The Company also provides (i) certain implementation services to get the customer onboarded for the purpose of provision of Cloudbased services; and (ii) user trainings to enable the end-user access the Subscribed services. (ii) Cloud- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date): b. Data collection (wherein the Company provides data templates and step-by-step instruction guide on the information needed from the Customer's systems); c. Application configuration and data import (includes determining currency requirements, reconciliation thresholds, email alert configuration, data import from data collection phase, etc.); and d. Data validation (to ensure that the data that has been imported into the Blackline application is correct and to verify that all the application settings have been reviewed). These services are ancillary or incidental to the subscription to the Cloud- based services by the customers/end-users. Implementation services are utilized at the time of on-boarding of a new customer or deployment of another standard Software product/another Software module for an existing customer and such services are not rendered throughout the period of provision of Cloud-based services. Once provision of implementation services is completed, the Hosted Services (ie., the Cloud- based Software) are deployed for the customer which functions automatically without any human intervention. (iv) User Training The Company provides on-demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Software, as a standard product, has inbuilt functionality to generate reports in varied formats. The functionality for the format, as desired by the client/customer is only enabled by the Company during implementation and there is no specific customization which is required to accommodate to the customer's desired format of the end output i.e., the reports. B. The Cloud-based services involve human element The services rendered involved human element as there is substitution of biological human by machine which is equipped to work like a human. (Reference is made to Para No. 2 on Page No. 15 and Para 10.3 on Page No. 23 of the Draft Order) Company's submission-The aforesaid is presumed by the Learned AD without providing any basis for stating so in the Draft Order. The fees charged is also based upon time spent by Company's personnel. Thus, it is clear that human element is also involved in the service rendered by the Company. (Reference is made to Para No. 3 on Page No. 15 of the Draft Order) Company's submission - The subscription fee towards the Software provided on cloud is not based on the time spent as there is no time spent in provision of Cloud- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce rendered by the assessee company. "To quote further from the reply received from Cipla for notice u/s 133(6) as reproduced below:-"Separately, we submit that online training on how to use the software is provided either by Blackline personnel to users or asked to view the relevant standard videos available in their website. Briefly it is operational training on list of available modules in the Blackline software and information on purpose of these module in regular business compliances is provided by Blackline team." "Variance Analysis refers to the Variance analysis module in the Blackline system where the Blackline team helped Cipla to implement the module integrated with SAP is analyze variances between various financial reporting parameters for comparable periods. Their services included implementation consulting testing and operational training." 4. Provisions of online training by the assessee again points to involvement of human element as well as satisfaction of Make available clause. In view of the above discussion, it is established that Human Element and Make available assessee company has used it to personnel for providing these services and has pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers. The ld. DRP held that the services rendered includes capability to mimicking human ability and human intelligence. The ld. DRP also held that the provision of services of on-going technical support and on-demand professional support satisfies the criteria technical support and hence FIS. 10. Aggrieved, the assessee filed appeal before the Tribunal. 11. Before us, the ld. AR reiterated the arguments taken before the ld. DRP and the ld. DR supported the directions of the ld. DRP both of which are part of the order of the ld. DRP mentioned above. 12. Heard the arguments of both the parties and perused the material available on record. Similar issue has also been examined in the case of SNC Lavalin Inc. in ITA No. 3691/Del/2023 by ITAT Delhi. 13. Article 12(4) of the India-US DTAA defines Fee for Technical Services as: "For the purposes of this Article, 'fees for Technical services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services a) are ancillary and subsidiary to the application or enjoyment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In this regard, the reliance is being placed on the judgment of the Hon'ble Jurisdictional Delhi High Court in the case of DIT vs. Guy Carpenter & Co. Ltd. (2012) 346 ITR 504 (Delhi) where it has been held as under: "We find that the common thread in all these tax treaties is the requirement of 'make available' clause. As learned counsel rightly puts it, its not simply the rendition of a technical service which is sufficient to invoke the taxability of technical services under the make available clause. Additionally, there has to be a transfer of technology in the sense that the user of service should be enabled to do the same thing next time without recourse to the service provider. The services provided by non residents did not involve any transfer of technology. It is not even the case of the Assessing Officer that the services were such that the recipient of service was enabled to perform these services on its own without any further recourse to the service provider. It is in this context that we have to examine the scope of expression 'make available'." 18. Basis the above, it can be held that the assessee do not "make available" any technical knowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
