Salesforce.com Singapore Pte. Ltd v. The Deputy Commissioner Of Income Tax,Circle 3(1)(2), International Taxation,New Delhi & Anr

$~24 *IN THE HIGH COURT OF DELHI AT NEW DELHI %Date of Decision : 07.07.2025 +W.P.(C) 2751/2025 & CM APPL. 13132-33/2025 SALESFORCE.COM SINGAPORE PTE. LTD. .....PetitionerThrough:Mr Vishal Kalra and Mr Anil Kumar,Advocates. versus THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE 3(1)(2), INTERNATIONAL TAXATION,NEW DELHI & ANR. .....Respondents Through:Mr Siddhartha Sinha, SSC and MrSrikant Singh and Ms Anu PriyaNisha Minz, Advocates CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIA VIBHU BAKHRU, J. (ORAL) 1.The Petitioner has filed the present Petition, inter alia, impugning anorder dated 21.01.2025 [impugned order] passed under Section 147 of theIncome Tax Act, 1961 [the Act] read with Section 144C(13) of the Act inrespect of Assessment Year 2018-19. The Petitioner also impugns thenotice of demand dated 21.01.2025 issued under Section 156 of the Act. 2.The Petitioner had filed a return of income for AY 2018-19 on 30.11.2018. The Petitioner’s return was selected for complete scrutiny onaccount of ‘large value refund’. The notice under Section 143(2) of the Actwas issued on 22.09.2019. Thereafter, on 15.11.2019, a notice under Section139(9) of the Act was issued pursuant to which the Petitioner filed therectified return on 22.11.2019, declaring the total income of ₹2,69,11,690/-. 3.While the proceedings for assessing Petitioner’s income for AY 2018-19 were pending before the Assessing Officer , the AO issued a noticedated 30.03.2022 under Section 148A(b) of the Act calling upon thePetitioner to show cause as why a notice under Section 148 of the Act be notissued in respect of AY 2018-19.This was followed by an order dated11.04.2022 passed under Section 148A(d) of the Act holding that it was a fitcase for issuance of notice under Section 148 of the Act. Pursuant to thesaid order, the AO also issued the notice under Section 148 of the Act. 4.We are at a loss to understand the requirement for commencingproceedings for reassessment while the assessment proceedings werecontinuing. Section 147 of the Act provides for assessment/reassessment ofincome that has escaped assessment. There is no question of incomeescaping assessment prior to the conclusion of the assessment proceedings. 5.The learned counsel for the Revenue is also unable to point out anyprovision of the Act which would enable the AO to issue notice underSection 148 of the Act for reopening of the assessment while the assessmentproceedings are ongoing and the assessment of the assessee’s incomechargeable to tax has not been concluded. 6.In our view for this reason alone, the impugned assessment order, which has been passed is pursuant to the notice issued under Section 148 ofthe Act is liable to be set aside. 7.On 05.05.2022, the Petitioner complied with the notice under Section148 of the Act and filed its return which was in line with the rectified returnfiled on 22.11.2019. 8.Thereafter, AO passed an assessment order dated 23.06.2022 underSection 143(3) of the Act read with Section 144C(13) of the Actdetermining the Petitioner’s total taxable income as ₹2,99,76,05,864/-. The said amount was determined after adding a sum of ₹2,97,06,94,174/- on account of Customer Relationship Management receipts. The AOconstrued the CRM receipts as Fees for Technical Services under theAct as well as under the provision of India-Singapore Double TaxationAvoidance Agreement [India-Singapore DTAA]. which has been passed is pursuant to the notice issued under Section 148 ofthe Act is liable to be set aside. 7.On 05.05.2022, the Petitioner complied with the notice under Section148 of the Act and filed its return which was in line with the rectified returnfiled on 22.11.2019. 8.Thereafter, AO passed an assessment order dated 23.06.2022 underSection 143(3) of the Act read with Section 144C(13) of the Actdetermining the Petitioner’s total taxable income as ₹2,99,76,05,864/-. The said amount was determined after adding a sum of ₹2,97,06,94,174/- on account of Customer Relationship Management receipts. The AOconstrued the CRM receipts as Fees for Technical Services under theAct as well as under the provision of India-Singapore Double TaxationAvoidance Agreement [India-Singapore DTAA]. 9.Clearly, with the passing of the assessment order, all other assessmentproceedings in respect of AY 2018-19 ought to have been terminated thathad commenced prior to the assessment order – even though commencederroneously – ought to have been concluded. However, the AO continuedthe parallel proceedings to once again to assess the Petitioner’s income,albeit in the context of the return filed by the Petitioner in response to thenotice issued under Section 148 of the Act. And, passed the draft assessmentorder dated 26.03.2024 under Section 144C(1) of the Act proposing toassess the Petitioner’s income as ₹2,97,89,60,099/- which included an amount of ₹2,95,20,84,409/- as FTS. 10.The Petitioner filed its objections before the Dispute Resolution Panel objecting to the said draft assessment order. In the meanwhile, thePetitioner also parallelly challenged the final assessment order dated23.06.2022 before the learned ITAT being ITA No.1923/Del/2022 in respectof AY 2018-19. The said Appeal was taken up by the learned ITATalongwith the 3 (three) other Appeals filed by the Petitioner in respect of theAYs 2019-20, 2020-21, and 2021-22. The said Appeals were decided by thecommonorderdated17.05.2024.ThelearnedITATacceptedthePetitioner’s contention that the CRM receipts could not be construed as FTSunder the India-Singapore DTAA, and therefore, were not liable chargeableto tax by virtue of the said treaty. 11.After the learned ITAT rendered the decision on the question whetherthe amounts received by the Petitioner as CRM receipts were FTS orroyalty, the DRP issued the directions dated 10.12.2024 (in the parallelproceedings that there commenced by the AO pursuant to the notice issuedunder Section 148 of the Act for the same assessment year – AY 2018-19).The DRP observed that the decision of the learned ITAT had attainedfinality and the additions made on account of the subscription of CRM wererequired to be deleted. 12.In the meanwhile, the Revenue filed an Appeal under Section 260A ofthe Act in this Court, being ITA No.567/2024, impugning the common orderdated 17.05.2024 in so far as it related to AY 2018-19. The said Appeal wasdismissed by this Court by the order dated 11.12.2024. 13.It is material to note that in The Commissioner of Income Tax –International Taxation-3 v. Salesforce.com Singapore Pte Limited: ITA No.144/2023, decided on 14.02.2024, this Court had considered the questionwhether the consideration for CRM services rendered by the Petitioner to itscustomers in India could be considered as royalty under the India-SingaporeDTAA and decided the issue in favour of the Petitioner. The said appealsarose in respect of AY 2010-11 to AY 2017-18. The Revenue’s appeal ( ITANo. 567/2024) was dismissed by this Court by relying on the aforesaiddecision in ITA No. 144/2023. This was also informed to the AO by thePetitioner. Notwithstanding the same, the AO proceeded to pass theimpugnedassessmentorderassessingthePetitioner’sincomeat₹2,97,89,96,099/-. 14.As noted above, the impugned order is unsustainable as it is the resultor the culmination of the proceeding that were initiated and continuedwithout any jurisdiction. No.144/2023, decided on 14.02.2024, this Court had considered the questionwhether the consideration for CRM services rendered by the Petitioner to itscustomers in India could be considered as royalty under the India-SingaporeDTAA and decided the issue in favour of the Petitioner. The said appealsarose in respect of AY 2010-11 to AY 2017-18. The Revenue’s appeal ( ITANo. 567/2024) was dismissed by this Court by relying on the aforesaiddecision in ITA No. 144/2023. This was also informed to the AO by thePetitioner. Notwithstanding the same, the AO proceeded to pass theimpugnedassessmentorderassessingthePetitioner’sincomeat₹2,97,89,96,099/-. 14.As noted above, the impugned order is unsustainable as it is the resultor the culmination of the proceeding that were initiated and continuedwithout any jurisdiction. 15.In any view of the matter, the issues sought to be raised areconclusively settled in favour of the Petitioner in terms of the decisionrenderedbythisCourtinTheCommissionerofIncomeTax–International Taxation-3 v. Salesforce.com Singapore Pte Limited (supra). 16.It is material to note that the Revenue had preferred the Special LeavePetition [SLP(C) Diary No.12246/2025] against the said decision before theSupreme Court, which was dismissed by the Supreme Court on 15.04.2025in terms of the following order: “Delay condoned. After having heard the learned counsel appearingfor the petitioner, we find no error in the impugnedjudgment of the High Court. The Special LeavePetition is accordingly dismissed. Signature Not Verified Pending application, if any, also stands disposedof.” 17.In view of the above, the present Petition is allowed. Consequently,the impugned assessment order is set aside. Pending Applications are alsodisposed of. VIBHU BAKHRU, J TEJAS KARIA, J JULY 07, 2025M Click here to check corrigendum, if any W.P(C) No.2751/2025