In a recent case, the Delhi High Court, while upholding the order of the Income Tax Appellate Tribunal ( ITAT ), held that payment received from the sale/supply of software is not royalty under Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement ( DTAA ).
The writ petition was filed by the petitioner, Commissioner Of Income Tax – International Taxation, against the order of the Income Tax Appellate Tribunal. In this appeal, the petitioner challenged the payment received from the sale/supply of software under Article 12(3) of the India-Singapore DTAA.
The consideration obtained from the software’s off-the-shelf sale was subject to tax as a result of the respondent/assessee being scrutinized and assessed. The addition made by the Assessing Officer (AO), in this regard, amounted to Rs. 1,14,09,24,658/-. The AO construed the said amount received by the respondent/assessee as royalty.
The Tribunal, with regard to the said issue, ruled correctly in favor of the respondent/assessee and concluded that the amount could not be treated as royalty within the meaning of Article 12(3) of the India-Singapore DTAA, the bench observed.
Having regard to the findings of fact and the enunciation of law by the Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT, the court observed that there was no need to interfere in the above decision of the ITAT.
Therefore, a division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia held that payment received from the sale/supply of software is not royalty under Article 12(3) of the India-Singapore DTAA.
Satyen Sethi and Mr. Arta Trana Panda, Advocates, appeared for the petitioner, and Ruchir Bhatia, Advocate, appeared for the respondent.
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