Back up IT support services not taxable as ‘technical services'
16th March, 2013
The Income Tax Appellate Tribunal (ITAT), Pune, in a recent case [Sandvik Australia Pty Ltd v. Deputy Director of Income Tax (International Taxation) decision dated 31-1-2013] examined the taxability of consideration for IT support services under domestic as well as the under Treaty provisions.
IT support services whether amounts to technical services
At issue was the IT services rendered by the appellant, a resident of Australia, to the Indian entity. The department contended the services provided were more than basic IT services such as help desk support and the assesse had created a global infrastructure to provide global functional services. The services rendered by it enabled it to achieve a standardized IT environment with the group.Thus, it was taxable as per provisions of Income Tax Act, 1961 as also under the DTAA with Australia as technical services had been made available. The department laid emphasis on use of the words ‘the provider party is prepared to transfer such knowledge to the receiving party ‘ in the contract between the assessee and Indian affiliate.
Mere support not enables recipient to use technical know-how
However, the Tribunal was of the view that the assessee being responsible for updation of patches of the software and provision of backup and recovery services in respect of data stored on the centralised server, did not impart-make available any technical know-how, skill, process. It reiterated that to ‘make available’, the recipient must be capable of applying such technical knowledge independently. The Tribunal held that the assessee had only provided the back-up services and IT support services for solving IT related problems to its Indian subsidiary. The Tribunal allowed the appeal of the assessee that the consideration received by it for providing IT support services could not be subject to tax.