The Supreme Court dismissed the Special Leave Petition ( SLP ) arose out of impugned final judgment and order passed by the High Court. The court upheld the order of High Court wherein it was ruled that the licensing of software products of Microsoft in territory of India is not taxable in India.
Gracemac Corporation, the assessee filed an appeal under Section 260A of the Income Tax Act, 1961 challenging the judgment and order passed by ITAT. Counsel for the appellant-Revenue submitted that ITAT has erred in holding that licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) of the Act read with Article 12 of the Indo US DTAA.
It was argued before the High Court that the Tribunal has failed to appreciate that the distribution model in the case of the respondent assessee involved making of multiple copies of the software clearly indicating transfer of copyright.
The High Court relied in the judgement of the case Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr, it was held that the EYGBS ( India ), in terms of the Service Agreement and the MOU, merely receives the right to use the software procured by the EYGSL ( UK ) from third-party vendors. The consideration paid for the use of the same therefore, cannot be termed as ‘royalty’ as held by the Supreme Court in Engineering Analysis Centre ( supra ). In determining the same, the rights acquired by the EYGSL ( UK ) from the thirdparty software vendors are not relevant.
A two judge bench of Justice B V Nagarathna and Justice Augustine George Masih upheld the judgement of the case Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr
The Court while dismissing the appeal upheld the order passed in Commissioner of Income Tax vs. M/s Gracemac Corporation.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
