Case Number: ITA 1877/DEL/2022
Appellant: RELX Inc, Gurgaon
Respondent: ACIT, Circle Int Tax 3(1)(1), New Delhi
Assessment Year: 2018-19
Order Date: 2023-04-05
Pronouncement Date: 2023-04-05
The primary dispute in this case involved the classification of INR 18,65,00,000 received from Indian customers as subscription fees. The key question was whether these fees should be treated as Fees for Technical Services (FTS) or as business profits, which are not taxable under the India-USA Double Taxation Avoidance Agreement (DTAA) given the absence of a Permanent Establishment (PE) in India.
RELX Inc. argued that the fees received do not constitute FTS as there was no technical service rendered that would ‘make available’ any technology or know-how to the recipients. The Income Tax Appellate Tribunal (ITAT) sided with RELX Inc., stating that the fees should be considered as business profits and not FTS, thus not taxable in India due to the lack of a PE. This decision was influenced by previous rulings in similar cases, emphasizing consistency in the interpretation of tax laws and treaties.
This judgment is significant for businesses engaged in providing access to digital content across borders. It clarifies the tax obligations related to subscription-based revenues and reinforces the importance of the specific terms of tax treaties, especially in the context of digital economies. This case could influence future tax assessments for digital and subscription services where physical presence does not define tax jurisdiction.
The tribunal’s decision highlights the evolving nature of international tax law, particularly in relation to digital services. It supports the notion that without a PE, the business profits generated by foreign entities from digital services are not taxable, fostering a more predictable and stable fiscal environment for international businesses operating in India.
Order pronounced in the open court on 2023-04-05.
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