Consideration received towards Software License Fee cannot be termed as 'Royalty': ITAT [Read Order]

ThePune bench of the Income Tax Appellate Tribunal (ITAT) comprising ShriInturi Rama Rao, A M and ShriS S Viswanethra Ravi, J M has held that consideration received towards software License fees cannot be termed as “Royalty”

The appellant TIBCO Software is a non-resident company incorporated in Netherland engaged in the sale of Software licences and provision of software maintenance, consulting and training services in India. The Assessing Officer issued notice u/s 148 on 29.03.2018 after recording reasons u/s 147, on receipt of information that the appellant had received income of Rs.33,96,623/- on which TDS had been deducted.

It was stated that the appellant company had received a sum of Rs.98,72,321/- towards Software licenses, Software maintenance and Customer support, Consultancy services and Training services in India. 

The appellant contended that the consideration received towards software maintenance, consulting services and training services cannot be considered as “Fees for Technical Services” under Article 12(5)(a)of the treaty. Further stated that consideration as Fees for Technical service does not arise as the consideration received towards software license fees cannot be considered as “Royalty” as per para 4 of Article 12 of the DTAA.

The Tribunal observed that the consideration received towards software license fees cannot betermed as “Royalty” and directed the AO to allow tax as per the information contained in Form No.26AS and in accordance with provisions of section 199 of the Income Tax Act, 1961. The appeal filed was partly allowed.

The assessee was represented by Shri Somil Agarwal and the Revenue was represented by Shri Deepak Garg.

To Read the full text of the Order CLICK HERE

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