This case analysis details the proceedings and decision in the Income Tax Appellate Tribunal, Delhi Bench ‘D’ for the assessment year 2019-20 involving ServiceNow Nederland BV, a Netherlands-based company, and the Assistant Commissioner of Income-Tax, Circle-International Taxation 3(1)(2), Delhi.
ServiceNow Nederland BV, engaged in providing cloud computing solutions globally, filed a return declaring significant income from its services in India and claimed exemption under the India-Netherlands Double Taxation Avoidance Agreement (DTAA). The controversy arose when the income tax authorities treated the income from various services as ‘Fees for Technical Services’ (FTS), leading to a dispute on the applicability of DTAA provisions.
The main issue was whether the income from subscription, professional, and training services rendered in India qualifies as FTS under the DTAA. The Tribunal examined the nature of the services provided and whether they involved the transfer of technology or made technical knowledge available, which are key determinants under the DTAA for classification as FTS.
The Tribunal’s analysis focused on whether the services provided by ServiceNow Nederland were merely access to software or constituted a transfer of technology that would categorize the payments as royalties or FTS under the DTAA. It concluded that the services did not make any technology available to the customers in India and thus did not qualify as FTS.
The Tribunal ruled in favor of ServiceNow Nederland BV, stating that the income from the services should not be taxed as FTS under the India-Netherlands DTAA. This decision emphasizes the importance of the specific terms of the DTAA and the nature of the services provided in determining tax liabilities under international tax laws.
ServiceNow Nederland BV vs. ACIT on Fees for Technical Services for AY 2019-20
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