#India-US DTAA

The ITAT Delhi has ruled that payments for software subscriptions do not constitute Fees for Technical Services under Article 12 of the India-US DTAA, distinguishing them from payments for professional services that do. This clarifies the tax treatment for global SaaS providers operating in India and reinforces the Engineering Analysis Centre precedent, offering critical relief to tech companies structured around subscription models.

Bombay High Court holds that only the actual income retained after refunding excess royalties under an Advance Pricing Agreement is taxable under Article 12 of the India-US DTAA. The ruling rejects the Revenue’s attempt to tax notional amounts, reinforcing the real income principle in international taxation and providing relief to multinational enterprises facing transfer pricing adjustments.

The ITAT Mumbai has ruled that market data charges recovered from Indian associates and employee expense reimbursements received by a U.S.-based financial firm do not constitute royalty or fees for technical services under the India-US DTAA. This clarifies the tax treatment of cross-border cost recoveries for global financial institutions operating through non-PE structures in India, reinforcing the boundary between taxable service income and non-taxable reimbursement.

ITAT Delhi clarifies that only unique solar days of employee presence in India count toward the 90-day threshold for Service Permanent Establishment under Article 5(2)(l) of the India-US DTAA, rejecting the Revenue’s cumulative man-day approach. This ruling impacts foreign companies providing services in India, ensuring tax liability is determined by actual presence rather than aggregated workdays.