August 2022
Articles 12(3) and 12(4) of India-Singapore DTAA – If income from sale of software is not royalty under Article 12(3), income from IT support services provided in relation to sale of software is not taxable as FTS, either under Art 12(4)(a) or under Art 12(4)(b)
By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
8 BMC Software Asia Pacific Pte Ltd vs. ACIT
[2022] 140 taxmann.com 328 (Pune - Trib.)
ITA No.: 97/Pune/2022
A.Ys.: 2018-19; Date of order: 15th July, 2022
Articles 12(3) and 12(4) of India-Singapore DTAA – If income from sale of software is not royalty under Article 12(3), income from IT support services provided in relation to sale of software is not taxable as FTS, either under Art 12(4)(a) or under Art 12(4)(b)
FACTSAssessee, a tax resident of Singapore, received income from the sale of software and IT-related services. The assessee did not offer it for tax on the footing that: the first receipt was for the sale of software licenses and not for the transfer of copyright, and the second receipt was for support services that did not make available any technical know-how to the customers.
The AO treated both receipts as taxable. Following the Supreme Court decision
1, the DRP held that while income from the sale of sotware license was not taxable, and that IT support services were in the nature of fees for technical services under the India-Singapore DTAA.
Being aggrieved, the assessee appealed to the ITAT. The issue before ITAT pertained to the taxability of IT support services.
HELDIncome from services will be taxable if it is covered under Article 12(4)(a) or Article 12(4)(b).
Article 12(4)(a) applies if the income is royalty under Article 12(3), and the services
