TUNGSTEN AUTOMATION ENGLAND LTD,UNITED KINGDOM V. DCIT,INTL TAXATION CIRCLE-3(1)(1), DELHI

ITA 1957/DEL/2025

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The case involves Tungsten Automation England Limited, a UK tax resident, which appealed against the assessment order for the Assessment Year 2018-19, where certain receipts from Genpact India Pvt. Ltd. were treated as FTS by the Assessing Officer. The Tribunal's decision was influenced by a prior ruling from the Delhi High Court, which found that the services provided by the assessee did not meet the 'make available' condition required for the receipts to be classified as FTS under Article 13 of the India-UK DTAA. The Tribunal noted that the assessment order for AY 2018-19 was identical to that of AY 2017-18, except for the amounts, and thus the legal and factual matrix was the same as in the previous years.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784707 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 28-03-2025
• Other Referred Cases: Centrica India Offshore P. Limited v. CIT, SFDC Ireland Limited v. Commissioner of Income Tax & Another, Commissioner of Income Tax International Tax-1 New Delhi v. Expeditors International of Washington Inc.
• Laws Referred To: Income Tax Act, 1961, India-UK DTAA
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.S. NETHRAPAL
• Assessee Lawyers: PRIYA TANDON
• Keywords: Set aside; Question of law; Double taxation relief
• Section: 147; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘D’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.1957/DEL/2025 [Assessment Year: 2018-19] Tungsten Automation England Limited (formerly known as Tungsten Network Limited) Leaf A, Level 1, Tower 42, 25 Old Broad Street, London, United Kingdom, EC2N 1HQ Vs The Deputy Commissioner of Income Tax, Circle International Taxation -3(1)(1), Room No.416, 4th Floor, E-2 Block, Pratyaksh Kar Bhawan, Civic Centre, J.L. Nehru Marg, New Delhi-110002 PAN-AAJCT5973F Assessee/Appellant Revenue/Respodent Assessee/Appellant by Ms. Priya Tandon, and Ms. Sheetal Kandpal, Advocates Revenue/Respondent by Shri M.S. Nethrapal, CIT-DR Date of Hearing 14.08.2025 Date of Pronouncement 10.11.2025 ORDER PER VIKAS AWASTHY, JM, This appeal by the assessee is directed against the Assessment order dated 29.01.2025 passed u/s 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter ‘the Act’), for Assessment Year 2018-19. 2. Ms. Priya Tandon, appearing on behalf of the assessee submits, that the assessee is a resident of United Kingdom. The residency Printed from counselvise.com 2 ITA No.1957/Del/2025 certificate of the assessee relevant to the period under appeal is placed at page no.1 of the paper book. During the period relevant to assessment year under appeal, the assessee received Rs.2,29,41,217/- from Genpact India Pvt. Ltd. for the services provided for converting raw data into e- form. The Assessing Officer has treated the said receipts as Fee for Technical Services (in short ‘FTS’) within the meaning of Article 13 of India UK DTAA and thus made addition of entire receipts. She submitted that identical addition was made by the Assessing Officer in hands of the assessee in AYs 2016-17 and 2017-18. The assessee carried the issue in appeal before the Tribunal in ITA No.2237 and 2238/Del/2024 for Assessment Years 2016-17 and 2017-18. The Tribunal vide common order dated 18.12.2024 dismissed appeal of the assessee. Thereafter, the assessee carried the issue further in appeal before the Hon’ble Delhi High Court in ITA Nos.92 and 93/2025. The Hon’ble High Court vide judgment dated 14.07.2025 decided the issue in favour of the assessee by holding that ‘make available’ condition is not satisfied therefore, the receipts does not fall with the meaning of FTS as defined in Article 13(4) of India-UK DTAA. The ld. Counsel contended that the facts in AY 2017-18 are identical to impugned assessment year. To substantiate that the issue and facts involved in the present appeal are identical to AY 2017-18, the ld. Counsel placed on record a copy of Printed from counselvise.com 3 ITA No.1957/Del/2025 the Draft Assessment Order for AY 2017-18 at pages 297 to 390 of the paper book. He pointed that the assessment order for AY 2018-19 is verbatim to the assessment order for AY 2017-18. The ld. Counsel submits that though assessee has raised multiple grounds of appeal assailing single issue. If ground no.6, 7 and 10 of the appeal are decided, the other grounds i..e ground of appeal no. 8, 9 and 11 to 21 would become infructuous and the assessee would not be pressing ground no.3 to 5 of appeal. 3. Per Contra, Shri M. S. Nethrapal, CIT-DR representing the Department, strongly defended the impugned assessment order. The ld. CIT-DR stated that the issue raised in the present appeal was considered by the Tribunal in assessee’s own case in the preceding Assessment Years i.e. AY 2016-17 and 2017-18 and the same was decided in favour of the Department. 4. Both sides heard, orders of the authorities below examined. The assessee is a foreign company and is a tax resident of UK. This fact is not disputed by the Department. 5. The assessee in the instant appeal has made submissions only on three grounds i.e. grounds no. 6, 7 and 10, the same are reproduced as under:- Printed from counselvise.com 4 ITA No.1957/Del/2025 “6. That the Respondent/ DRP failed to appreciate that the Appellant is in the business of rendering e-invoicing software and other related services which does not involve any specialised advice or consultancy, so as to be characterised as FTS under Explanation 2 to section 9(1)(vii) of the Act. 7. That the Respondent/ DRP failed to appreciate that since provision of e-invoicing software and other related services by the Appellant did not involve transfer of technology, hence, the said receipts cannot qualify as FTS under Explanation 2 to section 9(1)(viị) of the Act. XXXX 10. That the Respondent/ DRP erred in law in concluding satisfaction of the make available condition under Article 13(4)(c) of the Double Taxation Avoidance Agreement between India and United Kingdom (\"India - UK DTAA\"), without specifically stating how provision of e-invoicing software and other related services by the Appellant enabled the users thereof to apply such technology.” 6. The assessee in above grounds has assailed findings of the Assessing Officer/Dispute Resolution Panel in characterising receipts of the assessee as FTS within the meaning of section 9(1)(vii) of the Act, as well as, Article 13(4)(c) of India UK DTAA. From perusal of the impugned assessment order, we find that the assessment order for AY 2018-19 is verbatim of draft assessment order for AY 2017-18. So much so that in para 2 of the impugned assessment order, the ld. AR has not even bother to change the assessment year and has mentioned AY 2017-18 instead of 2018-19. Except for the receipt amounts, there is no change in the findings of the Assessing Officer in the impugned assessment year. Thus, Printed from counselvise.com 5 ITA No.1957/Del/2025 this makes it clear that the factual and legal matrix in the impugned assessment year is identical to AY 2017-18. The Revenue has also not disputed this fact. 7. In Assessment Year 2017-18, the assessee carried the issue before the Tribunal but remained unsuccessful. The assessee carried the issue in further appeal before the Hon’ble Delhi High Court in ITA No.92 and 93/Del/2025 (Supra). The substantial question of law which was considered by the Hon’ble High Court for examination was: “Whether the amounts received by the Assessee from GIPL/Genpact India Pvt. Ltd. can be construed as an FTS under Article 13 of the India-UK DTAA.” 7.1. The Hon’ble High Court after examining facts of the case, recital of Master partner Agreement dated 13.01.2009, provisions of Artilce 13 of India UK DTAA, provisions of section 9(1)(vii) and various decisions concluded as under:- “50. In the present case, the Assessee is the proprietor of an e- invoicing software and provides the services of generating electronic invoices compliant with local laws through its secure platform. The services entail automatically generating the e- invoices instead of creating and printing the same manually. The Assessee has provided the license for using its e-portal to GIPL in connection with the services rendered to GSK, which is a nonresident company. The invoices generated pertained to GSK’s European operations. The license granted to GIPL is a non- exclusive license for the use of the e-portal/software. It was explained that the data for generating the e-invoices is received from GIPL, either as files of data or through its portal. The Assessee claims that the data is formatted and translated so that it is consistent with the portal of GIPL. It also augments the data Printed from counselvise.com 6 ITA No.1957/Del/2025 with the standing data available as per GIPL’s profile. The data which was transmitted, includes the data files of the invoices, which have been prepared including the images of the said invoices in HTML, TIFF and/or PDF format. The data is also encrypted. The Assessee claims that it also implements reasonable and industry standard protection to eliminate harmful quotes from its data files/data images. 51. Neither GIPL nor GIL acquires any right in the source code of the software operated by the Assessee. The licence granted to GIL/GIPL to use the Assessee’s platform or its services, is limited to the term of the license. Neither GIPL nor GIL are granted any right to technology or source code of the software which would enable them to absorb the technology and independently exploit the same. Thus, whilst the Assessee renders services and grants access to its e-platform as part of its services, it does not make available any technical experience, skill, knowhow or process to GIPL or its client GSK. Thus, the services rendered by the Assessee do not satisfy the Clause (c) of Paragraph 4 of Article 13 of the India-USA DTAA. 52. Mr Aggarwal, learned counsel for the Revenue referred to Paragraph 2.3, Articles 5A and 5B of the MPA in support of the stand that the services rendered by the Assessee makes available the technical skill and knowhow to GIPL. He contended that Paragraph 2.3 of the MPA expressly grants right to the ‘Partner (GIPL)’ and, therefore, there is a transfer of rights. 53. We find no merit in the said contention. A plain reading of Paragraph 2.3 of the MPA indicates that the license granted by the Assessee is to use “OB-10 services”. The Paragraph 2.3 does not indicate any transfer of intellectual property right or technology, but only a license to use the services rendered by the Assessee. 54. Mr Aggarwal’s contention that in terms of Articles 5B and 5A, the Assessee provides training to the employees of GIPL and the same would amount to making available technical skill and knowhow to GIPL, is also unmerited. 55. In terms Paragraph 5.6 of the MPA, OB10 is obligated to “provide training to full time employee of the Partner to enable them to promote and use the OB10 Services”. The training contemplated is only for the purpose of using the platform and software in terms of the license granted by the Assessee. The training is not for imparting technical knowhow or knowledge Printed from counselvise.com 7 ITA No.1957/Del/2025 which is involved in rendering the services. As noted above, the Assessee provides the access of its e-portal and uses the software for generating the einvoices. The training as contemplated in Paragraph 5.6 is for using the software and e- platform, and not for the transfer of any technology, knowhow or source code of the software, which would enable the service recipient (GIPL) or its employees, who had received training to use the software, to continue rendering the services of generating of e-invoices after its license is terminated. There is neither the transfer of knowhow nor any training that makes available the technical knowledge, skill, knowhow or process used or involved in rendering the technical services. 56. Mr Aggarwal, also relied upon the decision of this Court in Centrica India Offshore P. Limited v. CIT11 and on the strength of the said decision, contended that since the Assessee is obliged to provide the training to the employees of GIPL, the same would satisfy the ‘make available’ criterion. 57. In our view, the reliance placed on the decision in Centrica India Offshore P. Limited v. CIT (supra) is misplaced. In the said case, the service provider had seconded employees to the service recipient. The said employees were involved in rendering of the services to the service recipient. In the facts of that case, the Court found: “32. ……. The activity of the secondees is thus to transfer their technical ability to ensure quality control vis-a-vis the Indian vendors, or in other words, “make available” their know-how of the field to CIOP for future consumption. The secondment, if viewed from this angle, actually leads to a benefit that transmits the knowledge possessed by the secondees to the regular employees. Indeed, any other reading would unduly restrict article 12 of the DTAA, which contemplates not only a formal transfer of intellectual property but also other techniques and skills (“soft” intellectual property, if it can be called as such) required for the operation of a business. The skills and knowledge required to ensure that the task entrusted to CIOP – quality control – is carried on diligently certainly falls within the broad ambit of article 12.” 58. In SFDC Ireland Limited v. Commissioner of Income Tax & Another12 , this Court had considered a similar contention with regard to the training imparted to the Indian entity in connection with the sale of certain products referred to in the relevant Printed from counselvise.com 8 ITA No.1957/Del/2025 agreement and the said decision as ‘SFDC products’. This Court had rejected that the training imparted in the context of the said products would render the remittance made by the Indian entity chargeable to tax as FTS. In the given facts, the Court had observed: “41. The technical assistance and training imparted to SFDC India staff appears to be aimed at enabling them to understand the various attributes and capabilities of SFDC Products so as to be informed when interacting with prospective customers in the territory. The technical assistance and training which is spoken of in Section 4.3 of the Reseller Agreement does not appear to bear the characteristics of a conferral of specialised or exclusive technical service. In any case, the training and assistance proffered by SFDC was a concomitant to the sale of its principal products in the territory and fundamentally aimed at readying SFDC India to undertake the marketing of those products. The technical assistance and training did not constitute either the core or the foundational basis of the consideration which was received by SFDC Ireland. 42. Insofar as the products for SFDC India’s internal use were concerned, they stood restricted to those which would enable SFDC India to demonstrate the functionality of SFDC products in trade shows and exhibitions, to train its customers and employees on the use of those products and products to administer and manage customer accounts. None of these aspects would appear to be imbued with a technical hue. Imparting training or educating a person with respect to the functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA. More importantly, the technical assistance and training which the petitioner proposed to provide was confined to marketing, distribution, support and sale of SFDC products. The assistance and training which Section 4.3 of the Reseller Agreement speaks of was concerned with fields wholly unrelated to providing technical service.” 59. It is equally relevant to refer to the decision of this Court in Commissioner of Income Tax International Tax-1 New Delhi v. Expeditors International of Washington Inc.13 , wherein the Court has observed: “9. Similarly, under the head of “Training and Personnel Management”, the assessee has spoken of Expeditors Ltd attempting to develop a “global culture” of ongoing Printed from counselvise.com 9 ITA No.1957/Del/2025 development of key personnel. Neither of the above would in our considered opinion qualify the “make available” condition which permeates FTS and as would become clearer from the discussion which ensues.” 60. Merely because the training is imparted by the service provider does not necessarily satisfy the ‘make available’ condition. It is important to bear in mind the purpose for which the training is imparted to the employees and the resource so developed. Undisputedly, if the training imparted results in the service recipient absorbing technology that enables the trainees to use the technical knowhow and the skill, which is central to the technical services that are rendered, on their own; the ‘make available’ condition would stand satisfied. This is because such training would result in the transfer of the technical skill, knowhow and the technical knowledge. However, if the training does not entail transfer of the technology or the technical skill or knowhow involved in rendering the services, the same would not qualify the ‘make available’ condition, which as noted above, is essential for the consideration to be construed as FTS under Clause (c) of Paragraph 4 of Article 13of the India-UK DTAA. 61. In the facts of the present case, the training imparted to GIPL’s employees for using the software or e-platform, does not transmit the technical knowhow or the process for rendering the services of generating electronic invoicing. The said service is performed by the Assessee by the use of its proprietary software and the e-platform operated by it. The training to use the said platform does not transfer the knowledge or transfer the technology, which would enable GIPL to absorb the technology to generate e-invoices and render the subject services on its own. GIPL does not acquire any rights in the Assessee’s proprietary software. 62. In view of the above, the question whether the payments received by the Assessee for rendering the services constitute FTS within the meaning of Paragraph 4 of Article 13 of the India-UK DTAA, is answered in the negative. Thus, the said receipts are not chargeable to tax under the Act. In this view, it is not necessary to examine whether such receipts constitute FTS within the meaning of Explanation 2 to Section 9(1)(vii) of the Act. 63. The appeals are, accordingly, allowed. The impugned order dated 18.12.2024 as well as the assessment orders dated 12.03.2024 in respect of AY 2016-17 and AY 2017-18, are set aside. The pending application(s), if any, also stands disposed of.” [Emphasized by us] Printed from counselvise.com 10 ITA No.1957/Del/2025 8. No material to controvert finding of the Hon’ble Delhi High Court on the issue have been brought on record by the Revenue, Thus, in light of the facts of the case and the decision of Hon’ble Jurisdictional High Court, we see no reason to take a contrary view in the impugned assessment year. Accordingly, assessee succeeds on ground no.6, 7 and 10 of the appeal. 9. In ground no.3 to 5 of appeal, the assessee has raised jurisdictional issue, the same are dismissed as no submission were made on the said grounds. 10. The grounds of appeal no.11 to 21 have become infructuous as the assessee succeeds on primary issue. 11. In ground no.22 of the appeal, the assessee has assailed that there are certain mistakes in computation sheet, consequently, the mistake has crept in the notice of demand u/s 156 of the Act. The Assessing Officer is directed to re-examine the same. Hence, ground no.22 is allowed for statistical purposes. 12. In ground no.23 of the appeal, the assessee has assailed initiation of penalty u/s 274 r.w.s 270A of the Act. The penalty proceedings are premature, hence ground no.23 is dismissed. Printed from counselvise.com 11 ITA No.1957/Del/2025 13. In ground no.24 to 26 of the appeal, the assessee has assailed the charging of interest u/s 234A, 234B and 234F of the Act. Charging of interest u/s 234A and 234B is mandatory and consequential, hence, the said grounds of appeal are dismissed. 15. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 10th November, 2025. Sd/- Sd/- [BRAJESH KUMAR SINGH] [VIKAS AWASTHY] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 10.11.2025. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Assessee 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "