Introduction
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of S & P Global Ratings Singapore Pte. Ltd. v. Assistant Commissioner of Income-tax (ITA No. 761/Del/2025), delivered a significant ruling on the taxability of cross-border credit rating and annual surveillance services under the India-Singapore Double Taxation Avoidance Agreement (DTAA) and the Income-tax Act, 1961. The Tribunal held that receipts from such services do not constitute royalty under Article 12(3)(a) or fee for technical services (FTS) under Article 12(4)(a) of the DTAA, as they involve no transfer of underlying know‑how or commercial experience. The decision, pronounced on 15 June 2026, set aside the Assessing Officer’s (AO) Assessment Order dated 9 January 2025 and the directions of the Dispute Resolution Panel (DRP), thereby deleting an addition of ₹73,22,67,191. This commentary provides a deep legal analysis of the reasoning, implications, and established principles reaffirmed by the ITAT.
Facts
The assessee, S & P Global Ratings Singapore Pte. Ltd., is a tax resident of Singapore under Article 4 of the India-Singapore DTAA. It provides credit rating and annual surveillance services to clients in various countries, including India, and has no permanent establishment (PE) in India. For Assessment Year 2022‑23, the assessee declared total income of ₹6,08,14,200, on which tax had been withheld by customers. However, the AO, during scrutiny, issued notices under section 133(6) to Indian customers and examined the service agreements. The AO concluded that the credit rating certificate constitutes “commercial information” because it is mandatorily required for raising international resources and enables the rated company to reduce borrowing costs. He held that the receipts fall under Article 12(3)(a) (royalty for information concerning commercial experience) and Article 12(4)(a) (ancillary and technical services) of the DTAA, and are also taxable as FTS under section 9(1)(vii) of the Act. The DRP upheld the AO’s draft assessment order, leading to the final assessment order dated 9 January 2025. Aggrieved, the assessee appealed to the ITAT.
Reasoning
The ITAT’s reasoning, delivered by Accountant Member Smt. Renu Jauhri, focused on the precise legal characterisation of credit rating and annual surveillance services. The Tribunal examined the definition of royalty under Article 12(3) of the India-Singapore DTAA, which includes payments for “information concerning industrial, commercial or scientific experience.” Relying on the OECD Model Convention Commentary (2010) – as referenced in the source text – the ITAT clarified that this term corresponds to the concept of “know-how.” Extraction from the commentary states: “In the know-how contract, one of the parties agrees to impart to the other… his special knowledge and experience which remain unrevealed to the public. The grantor is not required to play any part in the application… and does not guarantee the result.”
Applying this test, the Tribunal observed that credit rating services involve the assessee providing an opinion on the creditworthiness of a client based on its own expertise and methodology. The client does not acquire any right to use or possess the underlying analytical framework, secret formula, or commercial experience. The rating report is merely a reflection of the assessee’s independent evaluation; it does not transfer or “make available” technical know‑how that can be independently applied by the client. Therefore, the condition of “use or right to use” embedded in Article 12(3)(a) is not satisfied.
The Tribunal further held that the annual surveillance fee, being ancillary and provided in connection with the initial rating, cannot be classified as FTS under Article 12(4)(a) because it does not involve the rendering of any managerial, technical, or consultancy service that results in the transfer of technical knowledge or experience. The assessee merely monitors the client’s credit profile; the client does not gain any enduring benefit that can be used without recourse to the service provider.
Importantly, the ITAT relied on the coordinate bench decision in ICICI Bank Ltd. v. DCIT [2008] 20 SOT 453 (Mumbai) , which had consistently held that income from credit rating services is neither royalty nor FTS under the DTAA. The Tribunal followed this precedent, noting that the AO and DRP had failed to consider the binding judicial view and had erroneously equated the rating certificate with commercial information of a proprietary nature. The addition of ₹73,22,67,191 was thus deleted.
Conclusion
The ITAT’s decision in S & P Global Ratings Singapore Pte. Ltd. v. ACIT reaffirms the principle that cross‑border credit rating services, where the service provider does not make available any technical know‑how or commercial experience, do not fall within the ambit of royalty or FTS under the India-Singapore DTAA. The ruling underscores that the mere provision of a rating opinion, even if commercially valuable, does not constitute a transfer of intangible property rights. By deleting the entire addition and following the ICICI Bank precedent, the ITAT has provided clarity to non‑resident service providers and reduced litigation on this recurring issue. The decision also implicitly disapproves the AO’s reliance on section 9(1)(vii) of the Act without establishing a distinct source of income. Taxpayers and tax authorities alike will find this order instructive in distinguishing between know‑how contracts and service contracts for DTAA purposes.