Case Number: ITA 2147/DEL/2022
Appellant: Automation Anywhere Inc, Pune
Respondent: DCIT, Circle-1(1)(1), International Taxation, New Delhi
Assessment Year: 2018-19
Date Filed: September 2, 2022
Order Type: Final Tribunal Order
Date of Order: August 24, 2023
Pronounced On: August 24, 2023
Summary:
This case involves Automation Anywhere Inc., a non-resident corporate entity incorporated under the laws of the United States of America, which is a tax resident of the USA. The primary issue revolves around the existence of a Permanent Establishment (PE) in India and the profits attributable to such PE.
Automation Anywhere Inc. is a Developer, Marketer, and Seller of Robotic Process Automation (RPA) and related products and services. The company develops and sells RPA software and a Digital Workforce Platform (DWP), enabling customers to automate business processes using configurable software bots.
During the assessment year in dispute, Automation Anywhere Inc. earned revenue from two streams in India: fees from software licenses and fees from rendering services. The fees from rendering services were offered to tax in India by treating it as Fee for Technical Services (FTS)/Fee for Included Services (FIS), whereas the receipts from the sale of software licenses were treated as business income and not offered to tax in India in the absence of a PE under Article 7 of the India – USA Double Taxation Avoidance Agreement (DTAA).
During the assessment proceedings, the Assessing Officer called upon Automation Anywhere Inc. to furnish details of all Associated Enterprises (AEs) in India and the international transactions entered into with them in the relevant assessment years. Additionally, the Assessing Officer sought details of employees visiting India for providing services during the relevant assessment years.
Based on the information provided, the Assessing Officer observed that 30 employees of Automation Anywhere Inc. visited India for a total of 459 days, rendering services from the premises of the Indian AE, Automation Anywhere India Pvt. Ltd. Consequently, the Assessing Officer concluded that the company had a fixed place PE in India.
The Dispute Resolution Panel (DRP) directed the assessment orders, which led to the conclusion that Automation Anywhere Inc. had a fixed place PE in India and attributed 25% of the revenue earned from the sale of software licenses as profit attributable to the PE. The assessee, represented by advocates Sh. Damodar Vaidya and Sh. Sandeep Sachdeva, raised objections, but they were rejected.
The assessee contended that the Assessing Officer ignored crucial facts, such as the purpose and nature of employees’ visits to India, and that the premises of the Indian AE were not at the disposal of the visiting employees. The assessee provided evidence that employees’ visits were for shareholder activities, stewardship activities, marketing events, and training, all of which fall under auxiliary or preparatory activities excluded from being treated as PE under Article 5(3)(e) of the tax treaty.
The Tribunal, after considering the submissions and materials on record, concluded that the Revenue failed to establish that Automation Anywhere Inc. had a fixed place PE in India. The Tribunal noted that there was no evidence to support the Assessing Officer’s conclusion that the employees carried out core business activities from the premises of the Indian AE. Consequently, no part of the income from the sale of software licenses could be attributed to a PE in India.
Automation Anywhere Inc. raised additional grounds disputing the taxability of the amount offered as FTS/FIS and argued for the inclusion of receipts for professional services as the revenue of the fixed place PE. However, the Tribunal declined to entertain these additional grounds as they required fresh investigation into facts not examined at any previous stage.
The Tribunal allowed the appeal partly, ruling that Automation Anywhere Inc. did not have a fixed place PE in India and, therefore, no part of the income from the sale of software licenses could be attributed to such a PE.
Order Pronounced: August 24, 2023
Judges: Shri G.S. Pannu (President) and Shri Saktijit Dey (Vice-President)
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