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TMI Blog2025 (1) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the considered view that when software itself is not taxable, the Fees for provisions for other related services will also not be taxable. Hence, the addition made treating the Fees for provisions for other related services as taxable is not acceptable and the same is deleted. Assessee appeal allowed. - Shri Vikas Awasthy, Judicial Member And Shri Brajesh Kumar Singh, Accountant Member For the Assessee : Shri Nishank Vashistha, Adv. For the Revenue : Shri Vijay B. Vasanta, CIT-DR ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of the Assessing Officer dated 31.05.2023 passed u/s 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter the Act ) arising out of order of Dispute Resolution Panel dated 29.03.2023 pertaining to Assessment Year 2020-21. 2. The grounds of appeal are as under:- On the facts and in the circumstances of the case and in law, the learned Deputy Commissioner of Income Tax, Circle 3(1)(1) (International tax), New Delhi (' Ld. AO') has erred in passing the final assessment order dated May 31, 2023 under section 143(3) read with section 144C of the Income-tax Act, 1961 (the Act') and the Ld. Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to each other. 3. At the time of hearing of this appeal, the ld. Counsel for the assessee submitted that the assessee company doesn t want to press ground no.1 to 3; hence, the same are dismissed as not pressed. 4. Brief facts of the case: M/s TSYS Card Tech Ltd. (hereinafter: the assessee/ the assessee company ) is a foreign company, incorporated in UK and is a tax resident therein. The assessee is engaged in the business of providing information technology related services to financial payments industry and filed its return of income for Assessment Year 2020-21 on 15.02.2021 declaring income of Rs. 15,81,79,710/- claiming the same to be exempt as per the India- UK DTAA. During the impugned assessment year, the assessee had earned revenue from Indian Customer primarily as per the following details:- S. No. Particular Amount (in Rs. ) Whether offered to tax in India 1 Sale of Software (Prime) License Fee 1,84,01,550 No 2 Fee for provision for other related services 13,97,78,164 No 3 Receipt in the nature of reimbursement 1,08,12,740 No Total 16,89,92,454 4.1. The Assessing Officer accepted the claim of the assessee regarding its claim for non-taxability in respect of items at Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, the issue to be considered is whether the receipts on account of the said services are Fees for Technical Services under the India-UK DTAA. Article 13(4)(c) of the DTAA defines FTS as follows- 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term fees for technical services means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a)... (b)... (c) make available technical, experience, skill know-how or process, or consist of the development and transfer of a technical plan or technical design. 3.6.1 On perusal of the Software Licensing Agreement with UTI Bank, it is noted that, inter alia, the Licensor shall: 1. License to the Licensee on a non-exclusives basis runtime version of PRIME under the terms and conditions of this Agreement. 2. Provide service desk support for PRIME in accordance with Appendix IV. 3. Make available to the Licensee new releases of PRIME caused by changes to the relevant mandatory international and regional operating regulations of the payment associations... The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement whereby the assessee not only provides the project services but also required to provide all of the documentation, including Project Design and Planning Reports, PRIME Manuals and specification documents for agreed enhancements to the Licensee in lieu of Licensing Fees paid under the Agreement Apart from provision of specialised consultancy services for which the Licensor has the necessary expertise and know-how as per Appendix XIII of the Agreement, the Licensor shall also provide training on the use of PRIME to nominated personnel who in turn have full access to PRIME Manuals containing current version including any updates of all the relevant documents. Appendix III of the Agreement details all such documentation which includes system manuals, specifications of enhancements and project design and planning reports. The specialised training provided by the assessee accordingly allows the user to acquire/develop the capability to independently use the products. Further, through the service desk provided by the assessee, the user obtains access to the assessee's live and online technical support resources. 3.6.4 In addition, under the Software License Agreement with ICIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld in ITA No. 2601/Kol/2018 that income from such services is taxable as Fees for Technical Services in India even if the technical services were performed outside the country since the payment for the same is not for the process but for the results of testing which is used in India. Further, in Metro Metro, Agra us Assessee (I.T.A. No. 393/Agra/2012), Hon'ble Agra Bench of ITAT observed as under- 20. The principle of law, as clearly discernable from the observations made by Hon ble Delhi High Court in Bharati Cellular's case (supra), is that the word technical as appearing in Explanation 2 to Section 9 (1) (vii) would also have to be construed as involving a human element. In other words, when services have no human element involved, such services cannot be treated as 'technical services' for the purposes of Section 9(1)(vii). 21. In Siemens case (supra), however, the coordinate bench went much beyond what was held by the Hon'ble Courts above. The coordinate bench has concluded that, Thus if a standard facility is provided through a usage of machine or technology, it cannot be termed as rendering of technical services. Once in this case it has not been disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue, the assessees objections in this regard is rejected and the DRP confirms to the stand taken by it to treat the receipt of amount Rs. 13,97,78,164/- for the subject assessment year as FTS under India-UK DTAA, taxable at the applicable rate. 6. The Ld. DR supported the orders of the authorities below. 7. We have considered the rival submissions and perused the material available on record. The Co-ordinate Bench in assessee s own case in ITA No.2006/Del/2022 for AY 2019-20 has held that similar receipts amounting to Rs. 12,01,30,877/- on account of Fees for provisions for other related services was not taxable. The relevant ground and the discussion in the order of the Tribunal is reproduced as under:- xxxxxxxxxxxxxx 5. On the facts and in the circumstances o f the case and in law, Ld. AO/ DRP has erred in alleging that receipts from provision o f other related services amounting to Rs. 12,01,30,877 is taxable as FTS as per the Act read with India- UK DTAA. xxxxxxxxx 4. Brief facts of the case is that the assessee M/s TSYS Card Tech Ltd. Ltd is a company. Assessee is engaged in the business of providing information technology related services to financial payments industry. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated activities concerned with utilization and installation cannot be held to be FTS. The Ld. CIT-DR could not bring any distinguishing facts to controvert the findings of the above order of the Tribunal. Further, the Department has not brought any evidence on record to substantiate that make available condition is satisfied in the case of the assessee for this assessment year. Therefore, following the decision of the Co-ordinate Bench of the Tribunal in assessee s own case, we are of the considered view that when software itself is not taxable, the Fees for provisions for other related services amounting of Rs. 13,97,78,164/ will also not be taxable. Hence, the addition of Rs. 13,97,78,164/- made by the Assessing Officer treating the Fees for provisions for other related services as taxable is not acceptable and the same is deleted. Ground no.4 raised by the assessee is allowed. 9. Ground No.5 is against the initiation of penalty proceedings u/s 274 read with section 270A of the Act. This ground is premature in nature and the same is dismissed. 10. In ground no.6, the assessee submits that the AO has erred in short granting of credit of tax deducted at source amounting to Rs. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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