Licensing of Software Products of "Microsoft" in India by "HP Services" is not Taxable in India as Royalty u/s 9(1)(vi) and Article 12 of Indo US DTAA: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the licensing of the software products of Microsoft in India by HP Services is not taxable in India as royalty under Section 9(1)(vi) of the Income Tax Act, 1961 and Article 12 of Indo US DTAA.

The issue was with respect to the sale of off the shelf software considered as royalty. The issue was no more res integra as the quarrel has been settled by the Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt Ltd 432 ITR 471, which has been followed by this Tribunal in the assessee’s own case.

The Two-member bench comprising of Saktijit Dey (Vice-President) and N.K. Billaiya (Accountant Member) referring to the above mentioned case and the assessee’s own case held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software.

It would be pertinent to refer to the revenue from the sale of off the shelf software to two new companies which were not there in the earlier A.Ys, namely, Mphasis Finsource Ltd and Mphasis Software and Services [India] Limited. Since the ld. counsel for the assessee has fairly conceded that the revenue from these two companies are not covered by the agreement and the agreements are also not available, therefore, these companies may be taxed in the hands of the assessee as royalty.

Therefore, the Assessing Officer was directed to consider revenue from these two companies as royalty and tax as per the relevant provisions of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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