EDENRED PTE LTD ,MUMBAI V. DCIT INT. TAXATIONAL 2(2)(1), MUMBAI

ITA 749/MUM/2025

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Edenred Pte Ltd., a Singaporean company, appealed against the final assessment order for the assessment year 2022-23, which taxed certain receipts as royalty under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The receipts in question were Infrastructure Data Center (IDC) charges and Management Service Fees received from Indian group companies. The Assessing Officer had treated these receipts as royalty based on directions from the Dispute Resolution Panel. However, the Tribunal, referencing previous decisions in the assessee's own case, ruled that these receipts should not be taxed as royalty, leading to the deletion of the additions made by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708493 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2022-2023
• Other Referred Cases: Edenred Pte Ltd. vs DCIT, Bharati Axa General Insurance Co. Ltd. vs DCIT, Standard Chartered Bank vs DCIT, ExxonMobil Company India (P.) Ltd. vs DCIT, Reliance Jio Infocomm Ltd. vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA KUMAR
• Assessee Lawyers: JITENDRA SINGH SHIVALI MHATRE; FOLLOWING
• Keywords: Double taxation relief
• Section: 143(3); 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.749/MUM/2025 (Assessment Year : 2022-23) Edenred Pte Ltd., C/o. Walker Chandiok & Co. LLP, 16th Floor, Tower lll, One International Center, S B Marg, Prabhadevi (West), Mumbai-400013. PAN : AACCE8636P ............... Appellant v/s Deputy Commissioner of Income Tax – International Taxation -2(2)(1), Room No. 606, 6th Floor, Kautilya Bhavan, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051. ……………… Respondent Assessee by : Shri Jitendra Singh/Ms. Shivali Mhatre Revenue by : Shri Krishna Kumar, Sr.DR Date of Hearing – 15/07/2025 Date of Order - 17/07/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned final assessment order dated 27/12/2024, passed under section 143(3) r/w 144C(13) of the Income Tax Act, 1961 (“the Act”) by the Assessing Officer (“AO”), pursuant to the directions dated 25/11/2024, issued by the learned Dispute Resolution Panel–1, Mumbai, (“learned DRP’), under section 144C(5) of the Act for the assessment year 2022–23. ITA No. 749/Mum/2025 (A.Y. 2022-23) 2 2. In the appeal, the assessee has raised the following grounds: - “1. General Ground The Assessing Officer ('AO') has erred in assessing the total income at INR 7,70,44,246/-as against the returned income of INR 29,13,400/-. 2. Infrastructure Data Center charges taxed as Royalty The AO has erred in considering Infrastructure Data Centre charges of INR 6,76,64,872/- taxable as Royalty under the India - Singapore Double Taxation Avoidance Agreement ('DTAA'). 3. Management Service Fees taxed as Royalty The AO has erred in considering Management Service Fees of INR 64,65,974/- taxable as Royalty under the Act as well as under the India - Singapore DTAA. 4. The appellant craves leave to add, alter, and supplement any ground or grounds, if necessary, at the time of hearing of the appeal.” 3. The brief facts of the case are that the assessee is a tax resident of Singapore and is incorporated under the laws of Singapore. The assessee is engaged in providing services relating to developing, marketing, and implementing incentive-based strategies and technologies to build loyalty and to reward long-term relationships through the utilisation of the Internet, wireless technology, and offline solutions to its clients. For the year under consideration, the assessee filed its return of income on 09/02/2022, declaring a total income of Rs. 29,13,400. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the year under consideration, the assessee received the following receipts from companies, namely, Edenred (India) Private Ltd and Accentiv (India) Private Ltd (erstwhile SurfGold.com (India) Private Ltd) and came to the same is not taxable in India as per Article 12 of the India-Singapore Double Taxation Avoidance Agreement (“DTAA”): - ITA No. 749/Mum/2025 (A.Y. 2022-23) 3 Sr. No. Particulars Amount (in Rs.) 1. Infrastructure data Centre Charges (IDC) 6,76,64,872 2. Management Service Fees 64,65,974 Total Income 7,41,30,846 4. The AO, vide draft assessment order dated 20/03/2024 passed under section 143(3) of the Act, treated the aforesaid receipts on account of Infrastructure Data Centre (‘IDC’) charges, and Management Service Fees as royalty and added the same to the total income of the assessee. The learned DRP rejected the objections filed by the assessee. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 5. Ground no.1 is general in nature. Therefore, the same needs no specific adjudication. 6. The issue arising in ground no.2, raised in assessee’s appeal, pertains to the taxability of IDC charges received by the assessee. 7. The brief facts of the case, pertaining to this issue, as emanating from the record are: During the year under consideration, the assessee provided IDC services to its Indian Group Companies, which include IT infrastructure management and mailbox and website hosting services. During the year, the assessee earned a total income of Rs.6,76,64,872 under the head IDC services. These payments were received from its group companies, namely, Edenred (India) Private Ltd. and Accentiv (India) Private Ltd (erstwhile SurfGold.com (India) Private Ltd). During the assessment proceedings, the ITA No. 749/Mum/2025 (A.Y. 2022-23) 4 assessee was asked as to why the receipt should not be taxed in India as Royalty. In its response, the assessee, inter-alia, placed reliance upon the decisions of the Tribunal in its own case for preceding years, wherein IDC charges were held not to be taxable as Royalty under the provisions of the Act and the India-Singapore DTAA. The AO vide draft assessment order following the directions issued by the learned DRP in assessee’s own case for the assessment years 2020-21 and 2021-22 treated the aforesaid income as Royalty in terms of Article 12(3)(a) of the India-Singapore DTAA. In further proceedings, the learned DRP, following the directions rendered in assessee’s own case for the preceding assessment years, rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative (“learned AR”) submitted that a similar issue has been consistently decided in favour of the assessee by the coordinate bench of the Tribunal in the preceding assessment years. On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the orders passed by the lower authorities. 9. We have considered the submissions of both sides and perused the material available on record. We find that in a recent decision, the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd. vs DCIT, in ITA No. 4334/Mum./2023, vide order dated 28/03/2025, for the assessment year 2021-22, decided a similar issue in favour of the assessee by following the judicial precedents rendered in the assessee’s own case. The relevant ITA No. 749/Mum/2025 (A.Y. 2022-23) 5 findings of the coordinate bench of the Tribunal, in the aforesaid decision, are reproduced as follows: - “7. We have heard the parties and perused the material on record. We notice that the Co-ordinate Bench in assessee's own case for AY 2019-20 (ITA No. 1562/Mum/2022 dated 29.12.2022) has considered a similar issue where it has been held that “9. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd. vs DCIT, in ITA No. 6267/Mum./2019, vide order dated 22/09/2021, for the assessment year 2016–17, decided similar issue in favour of assessee by following the judicial precedents rendered in assessee’s own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under: “4. Having considered rival submissions and perused facts on record, we find that the first issue as raised in ground 3 relates to taxability of infrastructure data centre (IDC) charges as royalty. As submitted by both the parties, this is a recurring dispute between the parties since assessment year 2010-11. In the latest order passed for assessment years 2014-15 and 2015-16, the Tribunal has deleted the addition with the following observations:- “7. We have considered rival submissions and perused materials on record. Pertinently, identical issue relating to taxability of IDC charges as royalty came up for consideration before the Tribunal in assessee's own case in assessment years 2010-11, 2011-12 and 2012-13 in ITA No.l718/Mum/2014 & others dated 20-07-2020, The Tribunal, while deciding the issue has held, as under:- \"6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We find that (i) under the said IDC agreement, the appellant, essentially provides IT infrastructure management and mail box/website hosting services to its India group companies; these IDC services are performed by the appellant's personnel in Singapore; the Indian group companies directly remit IDC service payments towards the appellant's bank account in Singapore, (it) IDC is an ISO 27001 certified data centre owned by Edenred Pte. and located in Singapore; IDC services are provided using the IDC and IT/security team in Singapore, (Hi) the services under the IDC agreement comprise of administration and supervision of central infrastructure; mailbox hosting services and website hosting services, (iv) IDC services ensure 100% uptime for critical external facing applications which need highly secured web environment and dedicated team of security experts to ensure 100% uptime Edenred Pte Ltd. 11 ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 of security systems (firewall, antivirus, access controls) which are also hosted on server in Singapore. We further observe that examples of websites/applications/softwares hosted by Indian group companies on the data centre in Singapore are web ordering application, corporate website, websites created for customers of Edenred India entities while making o loyalty program for them. ITA No. 749/Mum/2025 (A.Y. 2022-23) 6 A perusal of the documents filed before the AO and DRP clearly indicate that (i) appellant has an infrastructure data centre, not information centre at Singapore, (H) the Indian group companies neither access nor use CPU of the appellant, (Hi) no CDN system is provided under the /DC agreement, no such use/access is allowed, (iv) the appellant does not maintain any such central data (v) IDC is not capable of information analytics, data management, (vi) appellant only provides IDC service by using its hardware/security devices/personnel ; all that the Indian group companies received are standard IDC services and not use of any software, (vii) bandwith and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such bandwith and network and not its use, (viii) consideration is for IDC services and not any specific program and (ix) no embedded/secret software is developed by the appellant. Against the above factual backdrop, let us discuss below the cose laws relied on both sides. 6.1 We begin with the case laws relied on by the id. counsel. A plethora of precedents on the subject in which we are presently concerned compels us, in order to avoid prolixity, to refer only a few decisions below. Edenred Pte Ltd. 12 ITA Nos. 1718/M/2014 254/M/2015 & 507/M/2016 In the case of Bharati Axa General Insurance Co. Ltd. (supra), the appellant, an Indian company carrying on business of general insurance entered into o service agreement with a Singapore company AXA ARC for receiving assistance such as business support, market information, technology support services and strategy support etc. from the tatter. The AAR held that (i) though the services rendered by AXA ARC may well be brought within the scope of the definition of FTS under the IT_Act_ as they answer the description of consultancy services or some of them may be categorized as technical services but the qualifying words \"make available technical knowledge, experience, skill, know-how, which enables the recipient of services to apply the technology contained therein\" in ArUde_12A of the DTAA make material difference, (ii) all technical or consultancy services cannot be brought within the scope of this definition unless they make available technical knowledge, knowhow etc. which in turn facilitates the person acquiring the services to apply the technology embedded therein, (Hi) services provided by AXA ARC to the applicant do not fulfill the requirements of the definition of FT5 in the DTAA, (iv) even assuming that they are technical or consultancy services, it cannot be said that the applicant receiving the services is enabled to apply the technology contained therein, (v) also there is nothing in the IT support services that answers the description of technical services as defined in the DTAA, (vi) therefore, the fees paid to AXA ARC by the applicant does not amount to fees for technical services within the meaning of the DTAA, (vii) as regards the payments made for providing access to software applications and to the server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the service agreement, same cannot be brought within the scope of the definition of Edenred Pte Ltd. 13 ITA Nos. 1718/M/2014 254/M/2015 & 507/M/2016 'royalty' in Article 12.3, (viii) there is no transfer of any copyright in the computer software provided by AXA ARC and it cannot be said that the applicant has been conferred any right of usages of the equipment located abroad, more so, when the server is not dedicated to the applicant. Similarly, in the case of Standard Chartered Bank (supra), the assesses bank entered into an agreement with a Singapore company SPt, for the provision of data processing support for its business in India and that ITA No. 749/Mum/2025 (A.Y. 2022-23) 7 data processing is down outside Indict. Application software by which data is transmitted to hardware at Singapore and processed by SPL at Singapore is owned by the assessee. Thus what is used by the appellant is the computer hardware owned by SPL. The Tribunal held that (i) payment in question can be said to be a payment for a facility which is available to any person wilting to use the facility, (ii) system software which is embedded in the computer hardware by which the computer hardware functions is not owned by SPL and SPL only has a license to use the system software ; (in) consideration received by SPL is for using the computer hardware which does not involve use or right to use a process, (iv) there is nothing on record to establish that the hardware could be accessed and put to use by the assesses by means of positive acts, (v) therefore, it cannot be said that the payment by the assessee to SPL is royalty within the meaning of Article 12 of the treaty. In ExxonMobi Company India (P.) Ltd. (supra), the assessee had paid certain amount to 'EMCAP', Singapore towards global support fees. The AO opined that payment made by the assessee was in the nature of FTS as defined in Explanation 2 to sectiorj 9(1)(vii) of the Act. The Tribunal observed that as per terms of agreement, EMCAP had to provide management consulting, Edenred Pte Ltd. 14 ITA Nos. 1718/M/2014 254/M/2015& 507/M/2016 functional advice, administrative, technical, professional and other supporting services to the assesses; however, there was nothing in agreement to conclude that in course of such provision of service, EMCAP had made available any technical knowledge, experience, skill, knowhow or process which enabled ossessee to apply technology contained therein on its own. Therefore, the Tribunal held that payment made by the assessee could not be considered as FTS as defined under Article 12(4)(b) of the India-Singapore DTAA. In M/s Reliance Jio Infocomm Ltd. (supra) for AY 2016-17, the Tribunal observes that though the India-Singapore Tax Treaty is amended by Notification No. SO 935(E) dated 23.03.2017, however, the definition of 'royalty' therein has not been tinkered with and remains as such. 6.2 Now we turn to the case taws relied on by the id, DR. In the case of Cargo Community Network (P.) Ltd. (supra), the assesses, a non resident company has its registered office at Singapore. It is engaged in the business of providing access to an internet based air cargo portal known as Ezycargo at Singapore. The applicant received payments from an Indian subscribers for providing password to access and use the portal hosted from Singapore. The AAR held that payments made for concurrent access to utilize the sophisticated services offered by the portal would be covered by the expression royalty. We find that subsequently, after considering the decision in Cargo Community Network (P.) Ltd. (supra), Mumbai ITAT in the case of Standard Chartered Bank 11 ITR 721 and Yahoo India Pvt. 140 TTJ 195 held that no part Edenred Pte ltd. 15 ITA Nos. 1718/M/2014 254/M/2015& 507/M/2016 of the payment could be said to be for use of specialized software on which data is processed as no right or privilege was granted to the company to independently use the computer. In the case IMT Labs (India) (P.) Ltd. (supra), the assessee, on Indian company, entered into an agreement with a non-resident American company for securing license of a particular software, which the applicant is entitled to use. The applicant has to pay license fee for ITA No. 749/Mum/2025 (A.Y. 2022-23) 8 usage of software to the American company. The AAR held that 'Smarterchild' application software on the American company's server platform is scientific equipment licensed to be used for commercial purposes and therefore, payments made for producing and hosting 'Interactive Agent' applications would be covered by the expression 'royalties' as used in Artjcfe_I2. However, we find that in the instant case, appellant only provides service by using its hardware/security devices/personnel and not use of any software and therefore the above case is distinguishable from the present appeal. In ThoughtBuzz (P.) Ltd. (supra), the applicant, a Singapore company was engaged in providing social media monitoring service for a company, brand or product. It was a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. The applicant offered service on charging a subscription. The clients, who subscribe, can login to its website to do a search on what is being spoken about various brands and so on. The AAR held that the amount received from offering the particular Edenred Pte Ltd. 16 IT A Nos. 1718/M/2014 254/M/2015& 507/M/2016 subscription based service is taxable in India as 'royalty' in terms of paragraph 2 of Article 12 of the DTAC between India & Singapore. However, we find that in the instant case, the appellant is only providing IDC service which includes administration and supervision of central infrastructure, mailbox hosting services and website hosting services and therefore, the ratio laid down in the above ruling is not applicable to the facts of the appellant's case. 6.3 From the enunciation of law in Bharati Axa General Insurance Co. Ltd; ExxonMobil Company India (P.) Ltd; Standard Chartered Bank v. DOIT; DCIT v. M/s Reliance Jio Infocomm Ltd narrated at para 6.1 hereinbefore, it is quite iuculent that revenues under the IDC agreement ought not to be taxed in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA. Therefore, we delete the addition of Rs.95,62,479/- made by the AO towards IDC charges and allow the 2nd ground of appeal.\" 8. Facts being identical, respectfully following the aforesaid decision of the coordinate bench, we hold that IDC charges received by the assessee is not in the nature of royalty. Accordingly, additions are deleted. Ground 2 in both the appeals are allowed.” 5. There being no difference in the factual position in the impugned assessment year, respectfully following the earlier decisions of the Tribunal in assessee‟s own case, we delete the addition. This ground is allowed.” 10. We find that this issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. 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 and direct the AO to delete the addition on account of IDC charges. As a result, ground No. 2 raised in assessee’s appeal is allowed.” ITA No. 749/Mum/2025 (A.Y. 2022-23) 9 8. For the year under consideration the ld. DR did not bring any new material on record for us to deviate from the above findings of the Co-ordinate Bench. Therefore, respectfully following the above order of the Co-ordinate Bench in assessee's own case, we note that the IDC and CRM Development Charges are not taxable in India and accordingly direct the AO to delete the addition made in this regard. Grounds 2 & 3 raised by the assessee are allowed.” 10. We find that this issue is recurring in nature and has been consistently decided in favour of the assessee by the coordinate bench of the Tribunal in assessee’s own case from the assessment year 2010-11. The learned DR could not show us any reason to deviate from the view so taken by the Tribunal, and no change in facts and law was alleged in the relevant assessment year. From the perusal of the order of the lower authorities, we find that there is also no finding that a contrary view has been taken against the assessee in order to keep the issue alive. 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 and direct the AO to delete the addition on account of IDC charges received by the assessee. As a result, ground no.2 raised in assessee’s appeal is allowed. 11. The issue arising in ground no.3, raised in assessee’s appeal, pertains to the taxability of Management Service Fees received by the assessee. 12. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee received Rs.64,65,974, on account of Management Service Fees from M/s Accentive (India) Private Ltd. As per the agreement, the assessee was required to refer to M/s.Accentive (India) Private Ltd. and in turn M/s Accentive (India) Private Ltd. will approach its global client interested in availing customer relationship ITA No. 749/Mum/2025 (A.Y. 2022-23) 10 management services in India. M/s Accentive (India) Private Ltd. was required to provide services to the aforesaid referred clients from the offices in India. During the assessment proceedings, the assessee claimed that the payment received on account of Management Service Fees is not taxable in India as per Article 12 of the India-Singapore DTAA. In this regard, the assessee also placed reliance upon the decisions of the coordinate bench of the Tribunal rendered in its own case for preceding years, wherein this payment was held to be not taxable as Royalty. The AO vide draft assessment order following the directions issued by the learned DRP in assessee’s own case for the assessment years 2020-21 and 2021-22 treated the aforesaid income as Royalty within the meaning of section 9(1)(vi) of the Act read with Article 12 of the India-Singapore DTAA. In further proceedings, the learned DRP, following the directions rendered in the assessee’s own case for the preceding assessment year, rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 13. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd., for the assessment year 2021-22 cited supra, decided similar issue in favour of the assessee by following the judicial precedents rendered in assessee’s own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are reproduced as follows: – “Management Service Fee taxed as Royalty ITA No. 749/Mum/2025 (A.Y. 2022-23) 11 12. During the year under consideration assessee has received as sum of Rs. 85,81,894/- as Management Service Fee from the Indian Group Company as per the agreement entered into by the assessee. The AO treated the impugned amount as Royalty as per section 9(1)(vi) of the Act r.w.Article-12 of the DTAA between India and Singapore. 13. We have heard the parties and perused the material on record. We notice that an identical has been considered by the Co-ordinate Bench in assessee's own case for AY 2010-11 to AY 2013-14 has considered similar issue and held the same in favour of the assessee. For the year under consideration the revenue did not bring any new material on record and therefore, respectfully following the decision of the Co-ordinate Bench, we direct the AO to delete the addition made in this regard. Ground No.5 raised by the assessee is allowed.” 14. We find that this issue is recurring in nature and has been consistently decided in favour of the assessee by the coordinate bench of the Tribunal in assessee’s own case from the assessment year 2010-11. The learned DR could not show us any reason to deviate from the view so taken by the Tribunal, and no change in facts and law was alleged in the relevant assessment year. From the perusal of the order of the lower authorities, we find that there is also no finding that a contrary view has been taken against the assessee in order to keep the issue alive. 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 and direct the AO to delete the addition on account of Management Service Fees received by the assessee. As a result, ground no.3 raised in assessee’s appeal is allowed. 15. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 17/07/2025 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 17/07/2025 ITA No. 749/Mum/2025 (A.Y. 2022-23) 12 ANANDI.NAMBI 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 "