US-resident individual’s software development income out of Article-15 scope, also excluded from Article-12

Ahmedabad ITAT rules that amount received by assessee (a US individual) for rendering software development services to an Indian entity not taxable in view of Article 15 (Independent personal services) of India-US DTAA during AY 2011-12; Rejects AO’s conclusion that services were not covered under Article 15, but were taxable as fees for technical services under Article 12; On Article 12 versus 15 applicability, ITAT holds that once the receipt is of a nature covered by Article 15, it shall stand excluded from Article 12 by applying sub-clause 5 of Article 12; Referring to the word ‘includes’ mentioned in Article 15(2), ITAT holds that the specific professions set out therein are only illustrative and not exhaustive, “The emphasis is essentially on the nature of services”, relies on Kolkata ITAT ruling in Graphite India Ltd.; As software development services “essentially requires predominantly intellectual skill, and dependent on individual characteristics of the person pursuing software development, and based on specialized and advanced education and expertise”, ITAT holds that the same falls under the ambit of ‘professional services’ under Article 15(2); Further, ITAT explains that “While dealing with the scope of services which are covered by article 15, it is important to bear in mind the fact that there could indeed be overlapping effect of the scope of services covered by the other articles but as long as the services are rendered by an individual or group of individuals, generally rendition of such services is covered by article 15.”; Cites Mumbai ITAT ruling in Linklaters LLP to elucidate that the applicability of Article 15 is also substantially influenced by the status of the recipient- i.e. whether he is an individual or whether he is a corporate entity; ITAT concludes that since assessee neither have any fixed base available to him in India nor he visited India for more than 90 days in the relevant year, conditions precedent for taxability under Article 15 not satisfied:ITAT