My client paid two per cent equalisation levy on its Indian receipts and the department has still assessed the same receipts as fees for technical services and denied s.10(50). In what order should the argument be run?
Characterisation first, exemption second. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act; the Act's only point of contact is section 10(50), whose Explanation 1 takes out of the exemption income chargeable as royalty or fees for technical services under the Act read with a treaty. The ITAT Mumbai held that a Singapore limited-risk distributor's revenue from Indian sub-distributors was not fees for technical services — it rendered no service, owned no intellectual property and made nothing available — and that the Dispute Resolution Panel could not test a Singapore resident under the India-Switzerland treaty merely because the group's software and intellectual property sat in Switzerland. Having so held, the Tribunal held that the bar in Explanation 1 to section 10(50) did not come into operation and the assessee was entitled to the exclusion, subject to verification of payment of the levy.
Decided by the ITAT (Amit Shukla, Judicial Member and Girish Agrawal, Accountant Member) on 2025-12-30, reported as ITA No. 2035/Mum/2025, Assessment Year 2022-23, Income Tax Appellate Tribunal 'I' Bench, Mumbai; heard 18 November 2025, pronounced 30 December 2025; no law-report citation traced. It bears on section 10(50), section 9(1)(vii), section 90(2), section 143(3), section 144C(13), section 143(2), section 142(1), section 270A of the Income Tax Act 1961, in Capital Gains Exemptions and Assessment & Scrutiny matters.
This is the clearest worked example of the section 10(50) sequence and it should be followed in that order in every reply. The exemption is not lost because the officer calls the receipt royalty or fees for technical services; it is lost only if the receipt IS that under the Act read with the applicable treaty. So the assessee must win characterisation, and once it does, the exemption falls into place with only one factual condition left — proof that the levy was paid. Both the Assessing Officer and the Panel here refused the exemption partly on the footing that proof of payment had not been furnished, which is why Form 1 and the challans belong on the record from the outset. The treaty holding is separately valuable and transportable well beyond the levy: treaty entitlement flows from the residence of the taxpayer whose income is being taxed, not from where the technology was developed, where the servers are, or which group entity owns the intellectual property, and the personal scope article confines a treaty to residents of the two contracting states. The Panel's approach — recording that the make-available condition in the India-Singapore treaty was not satisfied and then switching to the India-Switzerland treaty because it has no make-available clause — was held to be internally inconsistent and legally untenable. Limits: the case turned on undisputed facts, a principal-to-principal distribution agreement, an accepted tax residency certificate and no allegation that the assessee was a conduit; where the Revenue does allege sham or conduit, the reasoning does not transfer.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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Acronis Asia Pte Ltd is a Singapore company incorporated on 4 November 2004 and an undisputed tax resident of Singapore holding a valid tax residency certificate. All intellectual property, copyrights and source codes in the Acronis software products and the Software-as-a-Service platform are owned by Acronis International GmbH, a Swiss group entity. Under a Sales and Distribution Agreement dated 1 January 2011 the assessee was appointed a limited-risk distributor for the Asia Pacific and Japan region on a principal-to-principal basis, and for India it appointed independent third-party sub-distributors. For assessment year 2022-23 it earned Rs.8,16,73,828 from eight Indian sub-distributors, about 2.23 per cent of its regional distribution revenue. It discharged equalisation levy at two per cent on that consideration, treating it as consideration for e-commerce supply or services, and claimed exemption under section 10(50); in its return it characterised the receipts as business income not chargeable in India for want of a permanent establishment under Article 5 of the India-Singapore treaty. The draft assessment order of 16 March 2024 discussed the receipts as business income but the computation sheet characterised them as 'technical service fee as FTS', and the Assessing Officer held that no agreement or proof of payment of the levy had been produced so the section 10(50) claim could not be given. Before the Dispute Resolution Panel the assessee filed agreements, invoices and the levy challans with Form 1. The Panel recorded that the assessee itself rendered no technical services and that the make-available condition in the India-Singapore treaty was not satisfied, but held that because the core software infrastructure and technical functionality were owned and operated by the Swiss entity the India-Switzerland treaty applied, which has no make-available clause, so the receipts were fees for technical services; it also rejected the section 10(50) claim on the ground that the income was fees for technical services and that proof of payment of the levy had allegedly not been furnished. The final assessment order of 27 January 2025 made the addition, and the assessee appealed.
The appeal was allowed (paragraph 62). The Tribunal held that the distribution revenue could not be recharacterised as fees for technical services and constituted business income from distribution activity (paragraph 29); that invoking the India-Switzerland treaty in the hands of a Singapore resident was legally impermissible and wholly unsustainable, the assessee being entitled to the India-Singapore treaty (paragraph 40); that under that treaty the make-available condition in Article 12(4) was admittedly not satisfied so the fees-for-technical-services characterisation was ruled out (paragraph 42), and in the absence of a permanent establishment the receipts were not taxable as business profits under Article 7 (paragraph 43); that even under domestic law the receipts were not fees for technical services under section 9(1)(vii), there being no rendition of service and no human intervention (paragraphs 47, 48 and 50); and that, the receipts not being royalty or fees for technical services, the bar in Explanation 1 to section 10(50) did not come into operation, so the assessee was entitled to the exclusion subject to verification of payment of the levy, and the addition was directed to be deleted in entirety (paragraphs 55 and 57). The Assessing Officer was directed to verify and grant credit for tax deducted at source (paragraph 58); the penalty ground was dismissed as premature (paragraph 60) and the limitation ground was left open (paragraph 61).
On characterisation, the Tribunal started from the undisputed functional profile: a limited-risk distributor on a principal-to-principal basis under clause 2.3 of the group agreement, with no intellectual property and no contractual obligation to render support, distributing through independent Indian sub-distributors under agreements granting only a non-exclusive right to market and distribute and expressly preserving group ownership of intellectual property, and invoicing by quantity and price list (paragraphs 17 to 24). It held that whether a receipt is fees for technical services depends on whether the recipient rendered technical services to the payer, not on the benefits enjoyed by end users, applying the Delhi High Court in SFDC Ireland Ltd v. CIT 465 ITR 471 (paragraphs 27 and 28), and it fastened on the Panel's own finding that the assessee did not provide the core services (paragraph 26). On the treaty, it held that treaty entitlement flows from residence and that Article 1 of the India-Switzerland treaty confines it to residents of India or Switzerland, so a Singapore resident falls outside it; the reasoning that the 'origin' of services determines the applicable treaty is alien to international tax jurisprudence, and the income under consideration accrues to the assessee and must be tested under the treaty applicable to it (paragraphs 33 to 36). It applied the Bombay High Court in CIT v. Alibaba.com Singapore E-Commerce (P.) Ltd for the sanctity of the tax residency certificate and the impermissibility of ignoring a legally existing resident entity, noting that the Revenue had not even alleged that the assessee was a sham or conduit (paragraphs 37 and 38). On domestic law it applied the requirement of human intervention and rendition of service to the payer (paragraphs 46 to 48). On section 10(50) it set the clause out at paragraph 53, read it at paragraph 54 as excluding from total income income arising from e-commerce supply or services chargeable to the levy with the proviso and Explanation confining the exclusion only where the income is royalty or fees for technical services under the Act read with the applicable treaty, and concluded at paragraph 55 that the bar did not come into operation.
In the present case, having held that the distribution revenue does not constitute fees for technical services either under the Act or under the DTAA, the bar contained in Explanation 1 to section 10(50) does not come into operation.
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Handle my notice → Ask a CA on WhatsAppCharacterisation first, exemption second. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act; the Act's only point of contact is section 10(50), whose Explanation 1 takes out of the exemption income chargeable as royalty or fees for technical services under the Act read with a treaty. The ITAT Mumbai held that a Singapore limited-risk distributor's revenue from Indian sub-distributors was not fees for technical services — it rendered no service, owned no intellectual property and made nothing available — and that the Dispute Resolution Panel could not test a Singapore resident under the India-Switzerland treaty merely because the group's software and intellectual property sat in Switzerland. Having so held, the Tribunal held that the bar in Explanation 1 to section 10(50) did not come into operation and the assessee was entitled to the exclusion, subject to verification of payment of the levy. This was decided by the ITAT (Amit Shukla, Judicial Member and Girish Agrawal, Accountant Member) and bears on section 10(50), section 9(1)(vii), section 90(2), section 143(3), section 144C(13), section 143(2), section 142(1), section 270A of the Income Tax Act 1961. It is reported as ITA No. 2035/Mum/2025, Assessment Year 2022-23, Income Tax Appellate Tribunal 'I' Bench, Mumbai; heard 18 November 2025, pronounced 30 December 2025; no law-report citation traced. This is the clearest worked example of the section 10(50) sequence and it should be followed in that order in every reply. The exemption is not lost because the officer calls the receipt royalty or fees for technical services; it is lost only if the receipt IS that under the Act read with the applicable treaty. So the assessee must win characterisation, and once it does, the exemption falls into place with only one factual condition left — proof that the levy was paid. Both the Assessing Officer and the Panel here refused the exemption partly on the footing that proof of payment had not been furnished, which is why Form 1 and the challans belong on the record from the outset. The treaty holding is separately valuable and transportable well beyond the levy: treaty entitlement flows from the residence of the taxpayer whose income is being taxed, not from where the technology was developed, where the servers are, or which group entity owns the intellectual property, and the personal scope article confines a treaty to residents of the two contracting states. The Panel's approach — recording that the make-available condition in the India-Singapore treaty was not satisfied and then switching to the India-Switzerland treaty because it has no make-available clause — was held to be internally inconsistent and legally untenable. Limits: the case turned on undisputed facts, a principal-to-principal distribution agreement, an accepted tax residency certificate and no allegation that the assessee was a conduit; where the Revenue does allege sham or conduit, the reasoning does not transfer. If it applies to you, the first step is this: Run characterisation before exemption. Establish that the receipt is not royalty or fees for technical services under the Act read with the applicable treaty; only then plead section 10(50), and say expressly that Explanation 1 therefore does not engage.
Acronis Asia Pte Ltd is a Singapore company incorporated on 4 November 2004 and an undisputed tax resident of Singapore holding a valid tax residency certificate. All intellectual property, copyrights and source codes in the Acronis software products and the Software-as-a-Service platform are owned by Acronis International GmbH, a Swiss group entity. Under a Sales and Distribution Agreement dated 1 January 2011 the assessee was appointed a limited-risk distributor for the Asia Pacific and Japan region on a principal-to-principal basis, and for India it appointed independent third-party sub-distributors. For assessment year 2022-23 it earned Rs.8,16,73,828 from eight Indian sub-distributors, about 2.23 per cent of its regional distribution revenue. It discharged equalisation levy at two per cent on that consideration, treating it as consideration for e-commerce supply or services, and claimed exemption under section 10(50); in its return it characterised the receipts as business income not chargeable in India for want of a permanent establishment under Article 5 of the India-Singapore treaty. The draft assessment order of 16 March 2024 discussed the receipts as business income but the computation sheet characterised them as 'technical service fee as FTS', and the Assessing Officer held that no agreement or proof of payment of the levy had been produced so the section 10(50) claim could not be given. Before the Dispute Resolution Panel the assessee filed agreements, invoices and the levy challans with Form 1. The Panel recorded that the assessee itself rendered no technical services and that the make-available condition in the India-Singapore treaty was not satisfied, but held that because the core software infrastructure and technical functionality were owned and operated by the Swiss entity the India-Switzerland treaty applied, which has no make-available clause, so the receipts were fees for technical services; it also rejected the section 10(50) claim on the ground that the income was fees for technical services and that proof of payment of the levy had allegedly not been furnished. The final assessment order of 27 January 2025 made the addition, and the assessee appealed. The matter was decided on 2025-12-30 by the ITAT (Amit Shukla, Judicial Member and Girish Agrawal, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed (paragraph 62). The Tribunal held that the distribution revenue could not be recharacterised as fees for technical services and constituted business income from distribution activity (paragraph 29); that invoking the India-Switzerland treaty in the hands of a Singapore resident was legally impermissible and wholly unsustainable, the assessee being entitled to the India-Singapore treaty (paragraph 40); that under that treaty the make-available condition in Article 12(4) was admittedly not satisfied so the fees-for-technical-services characterisation was ruled out (paragraph 42), and in the absence of a permanent establishment the receipts were not taxable as business profits under Article 7 (paragraph 43); that even under domestic law the receipts were not fees for technical services under section 9(1)(vii), there being no rendition of service and no human intervention (paragraphs 47, 48 and 50); and that, the receipts not being royalty or fees for technical services, the bar in Explanation 1 to section 10(50) did not come into operation, so the assessee was entitled to the exclusion subject to verification of payment of the levy, and the addition was directed to be deleted in entirety (paragraphs 55 and 57). The Assessing Officer was directed to verify and grant credit for tax deducted at source (paragraph 58); the penalty ground was dismissed as premature (paragraph 60) and the limitation ground was left open (paragraph 61).
On characterisation, the Tribunal started from the undisputed functional profile: a limited-risk distributor on a principal-to-principal basis under clause 2.3 of the group agreement, with no intellectual property and no contractual obligation to render support, distributing through independent Indian sub-distributors under agreements granting only a non-exclusive right to market and distribute and expressly preserving group ownership of intellectual property, and invoicing by quantity and price list (paragraphs 17 to 24). It held that whether a receipt is fees for technical services depends on whether the recipient rendered technical services to the payer, not on the benefits enjoyed by end users, applying the Delhi High Court in SFDC Ireland Ltd v. CIT 465 ITR 471 (paragraphs 27 and 28), and it fastened on the Panel's own finding that the assessee did not provide the core services (paragraph 26). On the treaty, it held that treaty entitlement flows from residence and that Article 1 of the India-Switzerland treaty confines it to residents of India or Switzerland, so a Singapore resident falls outside it; the reasoning that the 'origin' of services determines the applicable treaty is alien to international tax jurisprudence, and the income under consideration accrues to the assessee and must be tested under the treaty applicable to it (paragraphs 33 to 36). It applied the Bombay High Court in CIT v. Alibaba.com Singapore E-Commerce (P.) Ltd for the sanctity of the tax residency certificate and the impermissibility of ignoring a legally existing resident entity, noting that the Revenue had not even alleged that the assessee was a sham or conduit (paragraphs 37 and 38). On domestic law it applied the requirement of human intervention and rendition of service to the payer (paragraphs 46 to 48). On section 10(50) it set the clause out at paragraph 53, read it at paragraph 54 as excluding from total income income arising from e-commerce supply or services chargeable to the levy with the proviso and Explanation confining the exclusion only where the income is royalty or fees for technical services under the Act read with the applicable treaty, and concluded at paragraph 55 that the bar did not come into operation. In the words reproduced by the source cited on this page: "In the present case, having held that the distribution revenue does not constitute fees for technical services either under the Act or under the DTAA, the bar contained in Explanation 1 to section 10(50) does not come into operation." The decision followed or applied SFDC Ireland Ltd v. CIT, 465 ITR 471 (Delhi High Court) — applied, that the enquiry is whether the recipient rendered technical services to the payer; CIT v. Alibaba.com Singapore E-Commerce (P.) Ltd (Bombay High Court) — applied, on the sanctity of a tax residency certificate and the impermissibility of ignoring a legally existing resident entity.
It was decided by the ITAT on 2025-12-30 and is reported as ITA No. 2035/Mum/2025, Assessment Year 2022-23, Income Tax Appellate Tribunal 'I' Bench, Mumbai; heard 18 November 2025, pronounced 30 December 2025; no law-report citation traced. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(50), section 9(1)(vii), section 90(2), section 143(3), section 144C(13), section 143(2), section 142(1), section 270A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed (paragraph 62). The Tribunal held that the distribution revenue could not be recharacterised as fees for technical services and constituted business income from distribution activity (paragraph 29); that invoking the India-Switzerland treaty in the hands of a Singapore resident was legally impermissible and wholly unsustainable, the assessee being entitled to the India-Singapore treaty (paragraph 40); that under that treaty the make-available condition in Article 12(4) was admittedly not satisfied so the fees-for-technical-services characterisation was ruled out (paragraph 42), and in the absence of a permanent establishment the receipts were not taxable as business profits under Article 7 (paragraph 43); that even under domestic law the receipts were not fees for technical services under section 9(1)(vii), there being no rendition of service and no human intervention (paragraphs 47, 48 and 50); and that, the receipts not being royalty or fees for technical services, the bar in Explanation 1 to section 10(50) did not come into operation, so the assessee was entitled to the exclusion subject to verification of payment of the levy, and the addition was directed to be deleted in entirety (paragraphs 55 and 57). The Assessing Officer was directed to verify and grant credit for tax deducted at source (paragraph 58); the penalty ground was dismissed as premature (paragraph 60) and the limitation ground was left open (paragraph 61). It arises in Capital Gains Exemptions and Assessment & Scrutiny matters, on section 10(50), section 9(1)(vii), section 90(2), section 143(3), section 144C(13), section 143(2), section 142(1), section 270A of the Income Tax Act 1961, and was decided by Amit Shukla, Judicial Member and Girish Agrawal, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. File the equalisation levy Form 1 and the challans with the objections, not later. The exclusion is 'subject to verification of payment', and both authorities below refused it partly for want of proof. Where a panel or officer switches treaties, take the personal-scope article head on: a treaty applies only to residents of the contracting states, and a taxpayer resident in a third state is outside it altogether. Where a panel records a finding in the assessee's favour — here, that the assessee rendered no technical services and that the make-available condition was not met — quote that finding back and show that the conclusion contradicts it. Keep the distribution documents in order: the agreement's nature-of-relationship clause, the intellectual property ownership clause and invoices showing billing by quantity and price list were what carried the characterisation point.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator search (doc 22187005, confirmed as 'Acronis Asia Pte Ltd, Mumbai vs Deputy Commissioner Of Income Tax' of 30 December, 2025) returns nothing, and a second probe on the taxpayer's name returned only the order itself. No later Tribunal or High Court decision has considered the Article 10/Article 50 treatment adopted here, and no s.260A appeal is on the record. Nothing overruling, doubting or distinguishing it was found, and no appeal to a High Court against it is disclosed on the record searched. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to sixty-two numbered paragraphs, the numbering is continuous and the disposal is at paragraph 62. Section 10(50) is reproduced at paragraph 53; that reproduction prints the two sub-clause labels as '(1)' and '(i)' where the statute has '(i)' and '(ii)', and my entry on section 10(50) records that and uses the statute's numbering. Two passages in the order are unusual and a reader should know about them: paragraph 23 says that clauses from a sub-distribution agreement 'are required to be reproduced verbatim and are, therefore, left to be incorporated hereunder' before then reproducing them, and paragraph 49 says that the judicial authorities relied on before the Panel 'are required to be taken note of in their entirety and are, therefore, consciously not reproduced here to avoid prolixity, but the relevant portions may be incorporated at the appropriate stage of finalisation'. Paragraph 24 refers to a sample invoice 'reproduced as under' and none appears. These read like drafting artefacts left in the signed order; they do not affect the holdings relied on here. Ground No. 2 (limitation) was kept open by the assessee and left open by the Tribunal, and Ground No. 10 (section 270A penalty) was dismissed as premature, so neither is decided. The citation the Tribunal gives for Alibaba.com Singapore E-Commerce is to a Taxmann report; that citation string appears inside the order and is reproduced here only as it stands, no Taxmann material having been consulted. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed (paragraph 62). The Tribunal held that the distribution revenue could not be recharacterised as fees for technical services and constituted business income from distribution activity (paragraph 29); that invoking the India-Switzerland treaty in the hands of a Singapore resident was legally impermissible and wholly unsustainable, the assessee being entitled to the India-Singapore treaty (paragraph 40); that under that treaty the make-available condition in Article 12(4) was admittedly not satisfied so the fees-for-technical-services characterisation was ruled out (paragraph 42), and in the absence of a permanent establishment the receipts were not taxable as business profits under Article 7 (paragraph 43); that even under domestic law the receipts were not fees for technical services under section 9(1)(vii), there being no rendition of service and no human intervention (paragraphs 47, 48 and 50); and that, the receipts not being royalty or fees for technical services, the bar in Explanation 1 to section 10(50) did not come into operation, so the assessee was entitled to the exclusion subject to verification of payment of the levy, and the addition was directed to be deleted in entirety (paragraphs 55 and 57). The Assessing Officer was directed to verify and grant credit for tax deducted at source (paragraph 58); the penalty ground was dismissed as premature (paragraph 60) and the limitation ground was left open (paragraph 61).
TaxSphere, “Acronis Asia Pte Ltd v. DCIT — distribution revenue was not fees for technical services, a Singapore resident cannot be tested under the India-Switzerland treaty, and the s.10(50) exemption follows once Explanation 1 does not bite”, https://taxnotice.vittsphere.com/caselaw/case/acronis-asia-10-50-exemption-allowed-once-the-receipts-were-held-not-to-be-fees-for-technical-services/ (validity last checked 2026-09-09)
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