Whether a tax resident of Singapore, taxable for sale of computer software in terms of the India-Singapore DTAA?

This case concerns whether a Singapore tax resident company, distributing computer software in the Asia Pacific region, is liable for tax in India on its software sales to Indian distributors and end-users. The company argued it had no physical presence in India and received payments outside the country, therefore not subject to Indian taxation. The Income Tax Appellate Tribunal ultimately allowed the appeal of the assessee.

IN THE INCOME TAX APPELLATE TRIBUNAL
“A” BENCH : BANGALORE
BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
IT(TP)A No.1861/Bang/2017
Assessment Year : 2014-15

M/s. Autodesk Asia Pte Ltd.,
C/o Autodesk India Pvt. Ltd.,
Diyashree Chambers,
A4, ‘A’ Wing, 2nd Floor,
Langford Road,
Bengaluru – 560 025.
PAN : AAFCA 6398 D

vs

The Deputy Commissioner of Income Tax
(International Taxation),
Circle -1(1),
Bengaluru.

Appellant by : Smt. Manasa Anantha, Advocate
Respondent by : Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru
Date of hearing : 15.09.2021
Date of Pronouncement : 20.09.2021
O R D E R

In this appeal, the question for consideration is whether the assessee who is a non-resident and tax resident of Singapore in terms of the India- Singapore Double Taxation Avoidance Agreement (DTAA) who acts as a distributor of computer software and providing ancillary services in the Asia Pacific region is taxable in respect of receipts on sale of computer software to Indian distributors / end users along with ancillary services.

2. The Assessee is a company incorporated in Singapore. The Company is a tax resident of Singapore in terms of the India-Singapore Double Taxation Avoidance Agreement (`the DTAA"). The assessee is engaged, inter alia, in the business of distribution of computer software and providing ancillary services in the Asia Pacific region. The computer software products distributed are design software which are used by architects, designers, engineers, etc. across several industries for the purpose of computer-aided designing. The assessee makes a payment to Autodesk Inc. in return, inter alia', for the manufacturing and distribution rights of the computer software granted to the assessee by Autodesk Inc., USA. The payment is computed based on a percentage of the computer software sales generated by the assessee. The assessee makes a margin by selling the computer software and related services to the third party distributors/ end-users. In India, the assessee supplies the computer software to Indian distributors/ end-users. The Indian distributors in turn sell the software to other distributors/ retail resellers in India who then sell the same to the end-users.

3.The assessee submitted that there was no right to use the software. Therefore, the receipts by the assessee cannot be taxed in India. Assessee also submitted that it has no physical presence in India and the sums were received outside India and therefore no income is taxable in India.

4.  In the result, appeal of the assessee is allowed.
Pronounced in the open court on the date mentioned on the caption page.

Please find attached the enclosed file for the full judgement