SALESFORCE.COM SINGAPORE PTE. LTD.,SINGAPORE V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION, CIRCLE-3(1)(2), NEW DELHI, NEW DELHI

ITA 2119/DEL/2025

AI Insights

Salesforce.com Singapore Pte appealed against the order of the Assessing Officer (AO) which added substantial receipts from CRM services to the taxable income of the company for the Assessment Year 2022-23, categorizing them as FTS. The company argued that similar issues had been previously ruled in their favor for earlier assessment years by the Tribunal and the Delhi High Court. The Department's appeals against these rulings were dismissed by the High Court. The Tribunal, referencing these precedents and the High Court's decisions, ruled in favor of Salesforce.com Singapore Pte, stating that the receipts in question are not taxable as FTS or royalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705932 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2022-2023
• Other Referred Cases: Engineering Analysis Centre for Excellence vs. CIT, Relx vs. CIT
• Laws Referred To: Income-tax Act, 1961, India-Singapore Double Taxation Avoidance Agreement
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIDDHARTH BHIMSINGH MEENA
• Assessee Lawyers: VISHAL KALRA
• Keywords: Question of law; TDS; Double taxation relief

Judgement Text

"Page 1 of 9 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI CHALLA NAGENDRAM PRASAD, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs. The A.C.I.T 5, Temasek, Boulevard #13-01, International Taxation Suntee Tower 5, Singapore Circle -3(1)(2) New Delhi PAN: AAOCS 2588 L (Appellant) (Respondent) Assessee By : Shri Vishal Kalra, Adv Shri Kashish Gupta, Adv Department By : Shri Siddharth Bhim Singh Meena, CIT-DR Date of Hearing : 27.06.2025 Date of Pronouncement : 04.07.2025 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is directed against the order dated 17.01.2025 for A.Y 2022-23. ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 2 of 9 2. The assessee has challenged the addition of receipts from Customer Relationship Management (‘CRM’) Services as Fee for Technical Services (‘FTS’), both under the provisions of the Income-tax Act, 1961 as well as under India-Singapore Double Taxation Avoidance Agreement (‘DTAA’). 3. The facts in brief is that Salesforce.com Singapore PTE Ltd filed its return of income for AY 2022 – 23 on 29.10.2022 declaring total income of rupees 3,78,04,450/-. The case was selected for scrutiny under CASS and statutory notice under section 143(2) was issued. The AO found that during the year under consideration, the assessee has received an amount of Rs. 876,79,90,897/- towards subscription of CRM from the Indian customers and the same has been claimed exempt by the assessee. The AO further on perusal of the assesses's ITR, found that it has claimed refund of Rs. 89,16,94,680/- against TDS amounting to Rs. 89,73,65,351/-. Such TDS has been deducted by various entities u/s 195 of the Act. The nature of the receipts earned during the year by the assessee being same as in AY 2021-22, he completed the assessment on the same basis and made and addition of Rs 8,76,79,90,897/- to the returned income of the assessee on account of subscription fees received for rendering of CRM services to Indian customers as FTS under ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 3 of 9 the provisions of Income Tax Act and also under relevant provisions of India-Sinagpore DTAA. 4. At the very outset, the ld. counsel for the assessee vehemently submitted that the issue involved in this case is squarely covered in favour of the assessee and against the Revenue by the decision of the co-ordinate bench in in assessee’s own case for A.Ys 2018-19 to 2021-22 order dated 17.05.2024 and by the judgment of the Hon'ble Delhi High Court order dated 14.02.2024 for A.Ys 2011-12 to 2017-18. 5. The ld. counsel for the assessee further submitted that the department’s appeals against the order of the Tribunal dated 17.05.2024 were dismissed by the Hon'ble Jurisdictional High Court vide order dated 12.12.2024. 6. The ld. DR fairly conceded to the above submissions of the ld. counsel for the assessee. 7. We have heard the rival submissions and have perused the relevant material on record. We find force in the contentions of the ld. counsel for the assessee. Similar issue came up before the Tribunal in assessee’s own case for A.Ys 2018-19 to 2021-22 in ITA 1923,1924,1789 and ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 4 of 9 3347/Del/2022 and 2023 where the ITAT vide order dated 17.5.2024, held as under: 3.6 We have considered rival submissions and perused materials on record. We have also examined the orders passed by the Tribunal and the Hon’ble Jurisdictional High Court while dealing with the issue in assessee’s case for earlier assessment years. The factual matrix reveals that whether the receipts from CRM services is taxable or not as royalty/FTS, is a legacy issue between the assessee and the Department starting from assessment year 2010- 11 onwards. While deciding the appeals of the assessee on identical issue in assessment year 2010-11 to 2016-17, the Tribunal in ITA no. 4915/Del/2016 and others, dated 25.03.2022, has held that the receipts from CRM services cannot be treated as royalty. Similar view was reiterated by the Tribunal while deciding assessee’s appeal for assessment year 2017-18 in ITA no. 316/Del/2021 dated 30.08.2022. Pertinently, against the aforesaid decisions of the Tribunal, Revenue went in appeal before the Hon’ble Jurisdictional High Court. While deciding the issue for assessment years 2010-11 to 2017-18, in a consolidated order passed in ITA 144/2023 and others dated 14.02.2024 the Hon’ble Jurisdictional High Court, after deeply examining the nature of dispute, held that neither receipts from CRM services are in the nature of royalty nor FTS. In other words, the Hon’ble Jurisdictional High Court upheld the decision of the Tribunal in assessment years 2010-11 to 2017- 18. For better appreciation, the relevant observations of the Hon’ble Jurisdictional High Court are reproduced hereunder: ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 5 of 9 “11. Since the copyright in the application was never transferred or came to vest in a subscriber, we fail to appreciate the contentions which are addressed on the anvil of Section 9 of the Act. This issue, in any case, stands conclusively settled bearing in mind the pertinent observations which were rendered by the Supreme Court in Engineering Analysis Centre for Excellence vs. CIT and have been noticed in Relx and have been reproduced hereinabove. 12. We deem it appropriate to additionally observe that the right of subscription to a cloud-based software cannot possibly be said to be equivalent to the 'use' or 'right to use' any industrial, commercial or scientific equipment. This more so since the respondents sought to place the consideration received under Article 12 (4)(b) and which is specifically excluded from sub-article (3)(b). 13. The argument based upon Article 12(4)(a) also cannot sustain since the same pertains to payments received as consideration for managerial, technical or consultancy services and which are ancillary or subsidiary to enjoyment of the right, property or information referable to paragraph 3. This again would be founded upon the payment foundationally falling within the ambit of royalty as defined therein. 14. Similar would be the position which would obtain bearing in mind the unambiguous language in which Article 12(4)(b) of the DTAA is couched. Article 12(4)(b) would ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 6 of 9 have been applicable provided the appellants had been able to establish that the assessee had provided technical knowledge, experience, skill, knowhow or processes enabling the subscriber acquiring the services to apply the technology contained therein. The explanation of the assessee, and which has gone unrefuted even before us, was that the customer is merely accorded access to the application and it is the subscriber which thereafter inputs the requisite data and takes advantage of the analytical attributes of the software. This would clearly not fall within the ambit of Article 12(4)(b) of the DTAA. 15. In any event, clauses (a), (b) and (c) are factors which must be found to exist in addition to the consideration for service being relatable to the provision of managerial, technical or consultancy services. This is clearly evident from Article 12 (4) using the expression \"if such services....\". However, once we have found that the principal conditions spelt out in Article 12(4) are themselves not satisfied, this issue would pale into insignificance. 16. Before parting, we deem it expedient to notice Explanation 4 to Section 9(1)(vi) of the Act which reads as follows:- \"Explanation 4. For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 7 of 9 use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.\" 17. It becomes pertinent to observe that Explanation 4 in essence introduces a deeming fiction and includes transfer of all or any rights \"for use\" or \"to use\" a computer software including by way of a license irrespective of the medium through which such right is transferred. Significantly, the DTAA does not bring within its sweep a right for use or a right of use of a computer software. 18. We, accordingly, find that the view taken by the ITAT merits no interference. We find that the appeals raise no substantial question of law. The appeals shall consequently stand dismissed.” 3.7 Observations made by the learned DRP in the directions issued for the impugned assessment year clearly reveal parity of facts between the impugned assessment year and assessment years 2010-11 to 2017-18. Therefore, respectfully following the decisions of the coordinate Bench and Hon’ble Jurisdictional High Court in assessee’s own case, as discussed above, we hold that receipts from CRM services are not taxable in India as royalty or FTS. Grounds are allowed.” ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 8 of 9 8. We further find that the Hon'ble Supreme Court vide order dated 15.04.2025 in SLP 12246/2825, finding no error in the order of the Hon'ble High Court, dismissed the appeal of the department filed against the above observations of the Hon'ble High Court of Delhi. In light of the above judicial pronouncements, respectfully following the same, we allow the grounds of appeal raised by the assessee. 9. In the result, appeal of the assessee in ITA No. 2119/DEL/2025 is allowed. The order is pronounced in the open court on 04.07.2025. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 04th JULY, 2025. VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi ITA No. 2119/DEL/2025 [A.Y 2022-23] Salesforce.com Singapore Pte Vs The A.C.I.T Page 9 of 9 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order . 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "