The ITAT Delhi reviewed multiple appeals filed by Microstrategy Singapore against orders from the CIT(A) regarding assessments for various years. The primary focus is on the 2017-18 assessment year, challenging the treatment of software sales and services.
Microstrategy Singapore, a subsidiary of Microstrategy, Inc., deals in the distribution and maintenance of software, along with providing related services in Asian markets, including India. The appeals concern the taxation of income received from software sales and support services, which the Indian tax authorities classified as ‘royalty’ and ‘Fees for Technical Services’ (FTS), thereby taxable under the India-Singapore DTAA.
The company argued that its software sales and services do not constitute royalty or FTS as defined under the DTAA between India and Singapore, asserting that these were mere sales of copyrighted articles without any transfer of copyright. Furthermore, Microstrategy Singapore claimed that it does not have a Permanent Establishment (PE) in India, and thus should not be taxed on these incomes.
The ITAT consolidated various appeals for a coherent decision. For the year 2017-18, it referenced its own previous rulings and decided in favor of Microstrategy Singapore, aligning with the appellant’s arguments that the receipts from software and services do not qualify as royalty or FTS under the specified tax treaty. This decision followed detailed examination of the nature of transactions and agreements presented.
The ruling has significant implications for taxation of foreign companies in India, especially those in tech and software industries, underlining the importance of understanding treaty definitions of PE, royalty, and FTS in cross-border transactions.
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform