DCIT(IT)-3(2)(2), MUMBAI V. MUREX SOUTHEAST ASIA PRIVATE LIMITED, SINGAPORE

ITA 1294/MUM/2025

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The case involves the Revenue's appeal against the orders of the learned Commissioner of Income Tax (Appeals)-57, Mumbai, which allowed the assessee's claim that its income from maintenance and training services provided to Indian customers is not taxable in India. The assessee, Murex Southeast Asia Private Ltd., a Singaporean company, argued that these services do not make available any technical skills, knowledge, or expertise to the Indian customers, and hence, do not fall under the definition of FTS as per the India-Singapore DTAA. The Tribunal referenced a similar case involving the same parties and similar facts, where it was previously held that such services do not constitute FTS.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314265 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2015-2016
• Other Referred Cases: M/s Murex Southeast Asia Pvt Ltd. v/s DCIT
• Laws Referred To: Income Tax Act, 1961, India-Singapore DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMENDU KUMAR DASH
• Assessee Lawyers: AJIT KUMAR JAIN; WAY OF
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.1294/MUM/2025 ITA No.1296/MUM/2025 (Assessment Year 2015-16) (Assessment Year 2017-18) ITA No.1295/MUM/2025 (Assessment Year 2016-17) DCIT(IT) – 3(2)(2), Room No.614, 6th Floor, Kautilya Bhavan, Bandra Kurla Complex, Bandra East, Maharashtra - 400051 ............... Appellant v/s Murex Southeast Asia Private Ltd. 10, Marina Bay Financial Centre, Tower – 2, Marina Boulevard, 19-01, Singapore PAN : AAICM4006F ……………… Respondent Assessee by : Shri Ajit Kumar Jain Revenue by : Shri Soumendu Kumar Dash, Sr.DR Date of Hearing – 06/05/2025 Date of Order - 08/05/2025 O R D E R PER BENCH The Revenue has filed the present appeals challenging the separate impugned orders of even date 27/12/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-57, Mumbai, [“learned CIT(A)”], for the assessment years 2015-16 to 2017-18. ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 2 2. Since all the appeals pertain to the same assessee, involving similar issues arising out of a similar factual matrix, these appeals were heard together as a matter of convenience and are being decided by way of this consolidated order. With the consent of the parties, the Revenue’s appeal for the assessment year 2015-16 is considered as a lead case, and the decision rendered therein shall apply mutatis mutandis to other appeals filed by the Revenue. For ready reference, the grounds raised by the Revenue in its appeal for the assessment year 2015-16 are reproduced as follows: – “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee is entitled to the benefits of the India-Singapore DTAA, that the assessee does not have any permanent establishment in India under Article 5 when clearly the assessee's case is that of Maintenance services and training services receipts covered under Article 12 of the DTAA? 2. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in not holding that the receipts of the assessee by way of maintenance services and training services ‘Fees for technical services' and Taxable u/s. 9(1) of the I.T. Act r.w. Article 12 of the DTAA between India and Singapore.” 3. The solitary issue that arises for consideration pertains to the taxability of income earned by the assessee from maintenance services and training services as Fees for Technical Services (“FTS”). 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a company incorporated in the Republic of Singapore and is engaged in the business of providing/sub-licensing software to entities in the Financial Service Sector. For the assessment year 2015-16, the assessee filed its return of income on 30/09/2015, declaring a total income ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 3 of Rs.Nil. During the assessment year 2015-16, the assessee earned revenue from the following streams: – Sl. No. Particulars Amount (in Rs.) (i) Sub-licensing of Software 1,11,99,600 (ii) Maintenance services 29,31,24,252 (iii) Training services 36,06,301 Total 30,79,20,153 5. The nature of maintenance services and training services provided by the assessee to its various clients is as follows: - “a) The assessee provides telephone and / or email assistance to the Indian customers during the assessee's normal business hours (9:00 to 18:00 Singapore time, Monday to Friday excluding holidays in Singapore). Such assistance consist of responding to the Indian customer's reasonable questions concerning use of Software program and resolving the discovery of bug. b) In case the assessee is not able to collect enough information for precise diagnosis of the customer's issue or when such diagnosis suggest need for another form of technical assistance, the assessee remotely log in to the customer's system to provide assistance to them. c) The assessee provides basic training to its customers for proper usage of the Software program at mutually agreed time and location. The assessee provides onsite training relating to the basic usage of the software only in case of special conditions and when the customer has specifically requested for onsite presence. d) The assesse also provides from time to time to its Indian customers an update to the Software program which includes correction of errors, improvements concerning the existing functioning of the program or the screens and program changes intended to improve the calculations, results and formulae of the software program.” 6. During the assessment proceedings, the assessee was asked to show cause as to why the income earned by the assessee from maintenance services and training services should not be treated as FTS and taxed in India. In response, the assessee submitted that the income earned from rendering maintenance services and training services in India is its income from business and thus should not be taxed in India in the absence of Permanent ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 4 Establishment in India as per Article 5 read with Article 7 of the India- Singapore Double Taxation Avoidance Agreement (“DTAA”). The assessee further submitted that as per Article 12 of the India-Singapore DTAA, income shall be considered as FTS only if managerial, technical or consultancy services are made available to the service recipient. However, even though the assessee is providing certain technical services to the Indian customers but it is not making them available to the Indian customers. Accordingly, the assessee submitted that the income earned by it from maintenance services and training services is not FTS under the provisions of the India-Singapore DTAA. 7. The Assessing Officer (“AO”), vide order dated 06/02/2018 passed under section 143(3) read with section 144C(3) of the Act, disagreed with the submissions of the assessee and held that the services provided by the assessee are not general in nature and are provided by technical experts/professionals from the field of software and information technology. The AO further held that the assessee is engaged in the business of providing/sub-licensing software to entities in the Financial Service Sector, and during the year under consideration, it provided the training services related to the basic use of its company's software. It was further held that such training services are not routine training services, but are offered on-site in India by the assessee’s personnel who travel for such purpose from its offices in Singapore. Accordingly, the AO held that the technical knowledge, experience, and skill possessed by the assessee with regard to various aspects were made available in the form of advice or services, which were finally used ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 5 by the Indian customers. Therefore, it was held that the income earned by the assessee on account of maintenance services and training services is FTS as per the provisions of Article 12 of the India-Singapore DTAA. 8. The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue and directed the AO to delete the addition made on account of maintenance services and training services, following the decision of the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2018-19. The learned CIT(A) further noted that similar conclusions/inferences were drawn by the AO in the assessment year 2018- 19, based on which the impugned addition has been made in the year under consideration by holding the receipts from maintenance services and training services as liable to tax as FTS under the India-Singapore DTAA as well as under the Act. The learned CIT(A) also noted that the facts of the earlier year under consideration before the Tribunal are similar to the instant assessment year, and the assessee has entered into similar standardised agreements with similar clauses with its different customers. Being aggrieved, the Revenue is in appeal before us. 9. During the hearing, the learned Departmental Representative vehemently relied upon the assessment order. On the other hand, the learned Authorised Representative placed reliance upon the decision of the coordinate bench in the assessee’s own case for the assessment year 2018-19, wherein a similar addition was deleted. ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 6 10. We have considered the submissions of both sides and perused the material available on record. We find that while deciding a similar issue pertaining to taxability of payments received by the assessee from maintenance services and training services, the co-ordinate bench of the Tribunal in assessee’s own case in M/s Murex Southeast Asia Pvt Ltd. v/s DCIT, in ITA No. 2338/Mum./2022, for the assessment year 2018-19, vide order dated 08/05/2022, after considering the relevant clauses of the agreement held that maintenance services and training services provided by the assessee to the Indian customers do not fall within the ambit of FTS under Article 12 of the India-Singapore DTAA as the services do not make available any technical skills, knowledge, or expertise etc., which enables the Indian customers to apply the technology contained therein, and therefore the income of the assessee from rendering the services is not taxable in India. The relevant findings of the Co-ordinate Bench, in the aforesaid decision, are reproduced as follows:– “10. After considering the relevant clauses of the maintenance agreement, we find that the assessee rendered maintenance and other support services to the in-house support team of Indian customers through telephone / email/ login assistance with respect to usage of the software programme. Such assistance is by responding to reasonable questions communicated by the in-house support team concerning the use of software programme and resolving the discovery of bug in respect of software supplied by the assessee. Before us, certain instances and examples have been cited as to how the assessee has been resolving the issue arising out of bugs provided by the software during the software maintenance. Further there are no onsite maintenance and support services, assistance provided by the assessee to the Indian customers. Apart from that, another very important fact is that there is no permanent establishment or any maintenance team of the company in India. Indian customers have in-house support team which is required to understand the source / requirements from the Indian customers. Employees of the Indian customers who are using the software, if they happen to come across any problem, then the same is referred to the assessee's technical team to help them to resolve errors / bugs. These Indian customers are mainly big organizations and the one of the biggest customer was SBI, to whom the assessee has sub-licensed its software and which is used by lakhs of ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 7 employees. SBI has an internal IT team to cater assistance to their employees in case there are any queries / bugs. That in-house team coordinates with assessee for resolving such queries / bugs. The in-house support team of the Indian customers is mainly a centralized point of contact for purpose of co- ordination and related activities of Indian customers with the assessee. Since, the role of in-house support team involves coordinating with the assessee regarding MSEA software programme supplied by the assessee, the personnel in such In-House support team / IT team need to be competent to know how to use the software program to be able to effectively explain the query / bug to MSEA which would then enable MSEA to identify the issue and resolve the same. This fact is clearly borne out from the relevant clauses of the agreements which has been filed before us and also which has been noted in the foregoing paragraphs. 11. In so far as the training part is concerned, the assessee company provides training to the end users and in-house team members of the Indian customers only with respect to the proper usage of the program. This training is a akin to training provided for operating any product, software and it is generally provided at the initial stage when the software is sub-licensed and subsequently provided only on need basis. Apart from that, as a part of maintenance services, assessee also provides updates to the software programmes like correction of errors, improvements concerning existing functioning of program, and changes intended to improve calculations / results / formulate of software program etc. There is no addition in the functionalities through such update which are only standard updates and not customization. Thus, the entire maintenance service contract is dependent on the software sublicensing agreement. In case of separate agreements for sublicensing and maintenance, there is a termination clause which provides that maintenance services will automatically terminate if software sublicensing contract is expired or terminated. Here, fees for maintenance services are annual and based on a percentage of licence fee and is not dependent upon the number of queries / bugs raised or resolved by the assessee. 12. If it is of recurring annual fees, there is no question that assessee was making available any technology or knowhow of the Indian customers on year to year basis as has been interpreted by the Id. AO. Assessee is having the technical expertise in the software sub-licensed by it. If there is any bug or problem faced by the customers while using the software, assessee provides trouble shooting to fix those bugs and helps them for maintaining and support of the software used by the clients. This does not mean that assessee had made available any technology in software. 13. Another allegation is that services have been provided on on telephone, on email, remote login and providing training for the software and therefore, it is 'make available'. If assessee is resolving the problems on software sub- licensed by it, this does not per se mean that any technology has been transferred or any know how has been make available which can enable the in-house team of the customer to acquire the technology. Thus, such maintenance support services and training services do not fall in the ambit and nature of FTS within Article 12(4) of India-Singapore DTAA, as these services do not make available any technical skill knowledge or expertise etc., which can enable Indian customer to apply the technology content therein. Thus, we ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 8 hold that these services are not liable to be taxable. In the result, this issue is passed in favour of the assessee.” 11. The learned Departmental Representative could not show any reason to deviate from the aforesaid order, and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the coordinate bench of the Tribunal. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee’s own case cited supra, we uphold the plea of the assessee. Accordingly, we do not find any infirmity in the findings of the learned CIT(A), which are based on the findings of the coordinate bench of the Tribunal rendered in assessee’s own case. As a result, the impugned order on this issue is upheld, and the grounds raised by the Revenue are dismissed. 12. In the result, the appeal by the Revenue for the assessment year 2015- 16 is dismissed. 13. As in the assessment years 2016-17 and 2017-18, the Revenue has raised similar grounds challenging the deletion of addition made on account of treating the receipts from maintenance services and training services as FTS, therefore our findings/conclusions as rendered in Revenue’s appeal for assessment year 2015-16 shall apply mutatis mutandis to these appeals. Accordingly, the impugned order in these appeals on this issue is upheld, and the grounds raised by the Revenue are dismissed. ITAs No.1294, 1295 & 1296/Mum/2025 (A.Ys. 2015-16 to 2017-18) 9 14. In the result, the appeals by the Revenue for the assessment years 2016-17 and 2017-18 are dismissed. 15. To sum up, all appeals by the Revenue are dismissed. Order pronounced in the open Court on 08/05/2025 Sd/- NARENDRA KUMAR BILLAIYA ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 08/05/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "