This case involves an appeal by Veritas Storage (Singapore) Pte. Ltd. against the decision of the Deputy Commissioner of Income Tax, which classified the company’s revenue from software licenses as Fees for Technical Services (FTS), for the assessment year 2019-20.
The core issue in this appeal was whether the revenues derived from software licensing should be treated as FTS or as business income under the provisions of the India-Singapore Double Taxation Avoidance Agreement (DTAA). The case was further complicated by discrepancies in the application of laws as previously adjudicated in similar matters.
The Income Tax Appellate Tribunal (ITAT) reviewed the case, considering submissions from both the appellant and the respondent. The ITAT referred to a landmark decision by the Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd., which set a precedent that the distribution agreements did not constitute an instance of making available technical knowledge, thus not qualifying as FTS.
The ITAT ruled in favor of Veritas Storage, directing that the income from software licenses should not be classified as FTS. This decision reaffirmed the applicability of the beneficial provisions of the DTAA over domestic tax laws when more favorable to the taxpayer.
Comprehensive Case Review: Veritas Storage vs. DCIT (2019) on Software Licensing and FTS
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