Training and Related Activities concerned with Utilization and Installation of Software Not FTS: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) held that the training and related activities concerned with utilization and installation of software not FTS.

The assessee M/s TSYS Card Tech Ltd. is a company engaged in the business of providing information technology related services to the financial payments industry.

 During the subject assessing year, the assessee had earned revenue from Indian Customer primarily for rendition of software license (referred to as ‘PRIME) and provision of software related services including implementation services, enhancement services, annual maintenance services and consultancy services as per the request of the Customers.

 The assessee has raised the grounds of appeal that on the facts and circumstances of the case and in law, the final assessment order passed by the assessing order is bad-in-law and liable to be quashed and it was an order without considering the material available on record and is bad in law and void ab initio since it has been passed without giving sufficient opportunity to the appellant.  Assessing officer has erred in initiating penalty proceedings under section 270A of the IncomeTax Act, 1961.

Council for the revenue contended that the other related services provided are in connection with utilization of the software (PRIME) which are intricately and inextricably associated. The services are in respect of training programmes and updates in connection with utilization of the software PRIME. Hence the software itself is not taxable, the training and the related activities concerned with utilization and installation cannot be held to be FTS.

The Coram comprising the judicial member Sh. SaktijitDey and the account member Dr. B. R. R. Kumar observed that the DRP has remanded the matter to the assessing officer to examine traveling and lodging expenses reimbursed. However, the assessing officer has wrongly taxed the same under FTS. Hence, the action of the assessing officer cannot be supported. The addition made is hereby directed to be deleted and the appeal allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.