Access to Platform Is Not Technology Transfer: Delhi High Court Rules E-Invoicing Service Not Taxable as FTS Under India-UK DTAA

In a decisive judgment delivered on 14th July 2025, the Delhi High Court in Tungsten Automation England Limited versus Deputy Commissioner of Income Tax (International Taxation) ruled against the Revenue’s attempt to classify payments received for e-invoicing services as “Fees for Technical Services” (FTS) under Article 13 of the India-UK Double Taxation Avoidance Agreement (DTAA). The Division Bench comprising Justice Vibhu Bakhru and Justice Tejas Karia emphatically observed, “the essence of the ‘make available’ clause is that the recipient should be equipped to perform the services on their own without recourse to the service provider.” With this landmark ruling, the Court protected the sanctity of treaty provisions over domestic tax law and clarified the scope of FTS in cross-border transactions involving technology-enabled services.

Tungsten Automation, a company incorporated in the United Kingdom, provided e-invoicing services to Genpact India Pvt. Ltd. (GIPL) under a non-exclusive license agreement. The services involved facilitating electronic invoicing through Tungsten’s proprietary platform for Genpact’s ultimate client, GlaxoSmithKline (GSK), for their European operations. The tax department alleged that Tungsten’s receipts of ₹2.93 crore in AY 2016-17 and ₹3.31 crore in AY 2017-18 constituted FTS, taxable in India under Section 9(1)(vii) of the Income Tax Act, 1961, and Article 13 of the India-UK DTAA.

The Assessing Officer initiated reassessment under Section 147, culminating in assessments upheld by both the Dispute Resolution Panel and the Income Tax Appellate Tribunal. The core contention was whether granting access to an e-invoicing platform amounted to rendering technical services within the meaning of the DTAA.

The central legal issue before the Court was whether the receipts from GIPL could be construed as FTS under Article 13(4)(c) of the India-UK DTAA, which restricts taxability to services that “make available technical knowledge, experience, skill, know-how or processes.”

The Court was categorical in stating, “The entire case hinges on whether the services rendered by Tungsten ‘made available’ any technical knowledge or skill to GIPL. It is settled law that if the recipient cannot perform the function independently, there is no ‘make available’.”

Examining the Master Partner Agreement (MPA) between Tungsten’s predecessor OB10 and Genpact International, the Court noted that Tungsten granted only a “non-exclusive, non-transferable license” to GIPL. Justice Bakhru observed, “The license was strictly confined to access and use of the e-invoicing platform; there was no transfer of source code, proprietary technology, or technical plans.”

The Court referenced authoritative decisions including Engineering Analysis Centre of Excellence (432 ITR 471, SC), De Beers India Minerals (346 ITR 467, Karnataka), and Guy Carpenter & Co. Ltd. (346 ITR 504, Delhi), to underline that “the provision of a technology-based service, without imparting underlying technical skill or know-how, does not satisfy the ‘make available’ threshold.”

The Court rejected the tax department’s argument that training sessions imparted to GIPL’s employees amounted to transferring technical knowledge. The Court emphatically stated, “Operational training enabling the use of the platform does not equate to imparting technical know-how. Training to use a tool is fundamentally different from transferring knowledge of how to build or replicate the tool.”

Justice Bakhru referred to the binding precedent in SFDC Ireland Ltd. v. CIT where it was held, “training that merely helps users navigate software is not a technical service but a commercial necessity.” The Court reinforced this principle stating, “The training was intended only to facilitate GIPL’s use of Tungsten’s platform and did not equip GIPL with the technical ability to generate e-invoices independently.”

On the overriding effect of DTAA, the Court reiterated the law laid down by the Supreme Court in Engineering Analysis by observing, “It is a settled proposition that the DTAA overrides the domestic statute when it is more beneficial to the taxpayer, and the narrower scope of FTS under the DTAA shall prevail.”

The Court clarified that under the India-UK DTAA, taxability arises only when the ‘make available’ condition is satisfied. Justice Bakhru explained, “Accessing a platform, no matter how technologically advanced, without the ability to replicate or independently render the underlying service, fails the make available test.”

In a comprehensive judgment that reaffirmed the primacy of treaty law and clarified the narrow scope of FTS under India’s tax treaties, the Delhi High Court held that “merely granting access to a service platform does not amount to technical service under Article 13 of the DTAA.”

The Court categorically quashed the assessment orders for AY 2016-17 and 2017-18, stating, “Receipts derived from providing e-invoicing services to GIPL do not make available technical knowledge and thus are not liable to tax under either the Act or the DTAA.”

With this judgment, the Delhi High Court drew a decisive line between technology-based services and technical services requiring knowledge transfer, providing substantial relief to global service providers in similar contractual arrangements.

Date of Decision: 14th July 2025