The Pune bench Income Tax Appellate Tribunal (ITAT) ruled that the income from IT support services and software licenses are not chargeable to tax.
The assessee, BMC Software Asia Pacific Pte Ltdengaged in selling Software products to end users and customers, and the Assessing Officer (AO) noted that the assessee earned an income of Rs.109,01,25,420/- from the sale of Software licenses and support services in relation thereto, which was not offered for taxation on the ground that the first item was towards the sale of software licenses. The AO passed the impugned order including IT Support service charges of Rs.42.42 crore in the total income.
Income from the sale of software license in the present case broadly falls under para 3(a) of Article 12 but has been held by the DRP to not satisfy the condition of taxability, income from Support and Maintenance charges of the licensed software also largely fall under para 4(a & b) but fail to magnetize taxability within its purview.
The Tribunal treated both as software royalty as the DRP in the earlier orders did not draw any such distinction and held the entire amount as chargeable to tax as royalty in the light of the decision in Samsung (supra).
Shri R S Syal, vice president, and Shri Partha Sarathi Chaudhury, judicial member concluded that the income from IT Support services, even if viewed independent of software license income, is not chargeable to tax and the addition of Rs.42.42 crore and was directed to be deleted. The appeal was allowed.
The assessee was represented by Shri Farrokh V Irani and the revenue was represented by Shri Shishir Srivastava.
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