This case involves Veritas Storage (Singapore) Pte Ltd (the appellant), which challenged the classification of income from software licenses and hardware sales as Fees for Technical Services (FTS) by the DCIT, Circle 3(1)(1), International Taxation, New Delhi (the respondent) for the assessment years 2018-19 and 2019-20.
The primary contention in this case was whether the revenue from software licenses constitutes FTS or should be treated as business income under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The assessment was originally based on the directions of the Dispute Resolution Panel (DRP).
The appellant argued that the categorization of the income from software licenses as FTS by the Assessing Officer was incorrect. They relied on the Supreme Court’s decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, which influenced the treatment of similar cases. The ITAT agreed with the appellant, citing precedents that software licenses do not constitute FTS if they do not allow the use of or right to use copyright, as per the DTAA and the IT Act.
The Tribunal’s decision favored the appellant, directing the Assessing Officer to treat the income from software licenses as non-taxable under the DTAA, thus not subject to FTS. This judgment reaffirms the distinction between royalties and FTS in the context of software licensing under international tax law.
Case Analysis: Veritas Storage (Singapore) Pte Ltd vs. DCIT on Software Licenses Classified as FTS
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