Marketing Support Services provided by Microsoft India to Its Overseas Group is not subject to Service Tax: CESTAT [Read Order]

The Chandigarh bench of the CESTAT recently held that the marketing support services provided by Microsoft India to M/s Microsoft Operations P. Ltd. Singapore, amount to export of services and hence are not liable to service tax.  The bench clarified that the services being provided by appellants satisfy the conditions of Export of Service Rules, 2005, hence no service tax is leviable.

The appellants, a wholly owned subsidiary of Microsoft Corporation, USA and are incorporated in India, was paying service tax for providing services under the category of Business Auxiliary Services, Manpower Recruitment Agency and Management, Maintenance and Repair Services.

Under a market development agreement with its overseas group, Microsoft Singapore, the appellant undertook marketing activities like maximizing the markets for Microsoft products including all local advertising, dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry, investigating feasibility for new markets for Microsoft products etc.

The appellant claimed that the Marketing Support Services (MSS) provided by the Appellant to Microsoft Singapore during the relevant period qualify as export of service under the Export of Service Rules, 2005 and therefore the consideration including reimbursements received by the Appellant from Microsoft Singapore is not taxable.

Further, it claimed that the reimbursement received in relation to Product Support Services (PSS) rendered by the Appellant is not taxable for the period from 09.07.2004 to 31.03.2005.

However, the department rejected these claims and brought these for tax.

The bench relied on the majority decision in the case of Paul Merchants Ltd. wherein it was observed that the services provided by the agents and some agencies being delivery of money to the intended beneficiary of the customer of the western units abroad, which may be located in India and the services provided being business auxiliary services is also to be the western unit who is recipient of services and consumers of services.

The bench further observed that the disputed service is the service being provided by the appellant to his principal located in Singapore. “The marketing operations done by the appellant in India cannot be said to be at the behest of any Indian customer. The service being provided may or may not result in any sales of the product in Indian soil. The transactions and activities between the appellant and Singapore principal company are the disputed activities. As such, the services are being provided by the appellant to Singapore Recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services,” the bench said.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader