Receipts By Foreign Entity From Provision Of Software Services In India Are Not Taxable U/s 44BB In Absence Of Its PE In India: Delhi ITAT

The Delhi ITAT ruled that receipts by a Canadian company for providing software services to Indian oil companies are not taxable in India as business profits, due to the absence of a Permanent Establishment (PE) in the relevant assessment years (AYs). Section 44BB of the Income Tax Act, which governs the taxation of non-residents providing services related to mineral oils, was deemed inapplicable.\r

The Division Bench, comprising G.S. Pannu and Astha Chandra, noted that the company, a tax resident of Canada, benefits from the India-Canada DTAA, which takes precedence if more favorable. The Assessee, supplying reservoir simulation software and related services to companies like ONGC and Oil India, did not file returns despite TDS deductions. The AO had calculated the Assessee's income under Section 44BB but failed to prove the existence of a PE in India. \r

Citing jurisdictional High Court judgments, the Bench affirmed that the absence of a PE means the receipts are not taxable under Section 44BB. Consequently, the ITAT directed the AO to grant TDS credit and interest under Section 244A. Counsel for the taxpayer was Manuj Sabharwal, and Vizay B. Vasanta represented the department (ITA No. 2090/Del/2023).