The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) ruled that receipts from sale/distribution of software to Indian Associate Enterprise ( AE ) are not taxable under the Article 12(3) of India-Singapore DTAA,.
The assessee Finastra International Financial Systems PTE Ltd is an entity incorporated under the local laws of Singapore and the Company receives income from sale/ distribution of computer software in India, from its subsidiary, Misys Trade & Risk Management ( India ) Private Limited.
For the current AY, the Assessee received income amounting to INR 23 ,21,52,964 by way of sale of software to entities domiciled in India. For the AY under consideration, the Assessee filed its original return of income and filed its revised return of income on 23 March 2021, declaring total income as ‘Nil’ and claiming a tax refund o f INR 2 ,34,03,813 due to TDS credits.
Subsequently the Assessing Officer treated the receipts earned by the assessee through sale o f software as taxable u/s 9(1)(vi) of the Act as well as under Article 12(3) of India-Singapore DTAA and accordingly proposed to charge amount of Rs. 23,21,52 ,964/- as FTS taxable @10%.
Aggrieved, the assessee filed objections before the DRP. who rejected the objection of the assessee . Therefore the assessee filed an appeal before the ITAT.
Assesee representative, Suryanarayan argued that the facts of this case are squarely covered by the judgment of the Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd
Accordingly the counsel argued that as per the agreement between the assessee and the Indian entity ( distributor, MTRM ) there is only transfer of right to use software which is being granted. The assessee merely licenses the software products to Indian end users without removing the name of the ultimate end user.
Vizay B. Vasanta, the Department representative supported the order of the Assessing Officer
After observing the submissions of both parties the two-member bench Of Dr. B. R. R. Kumar, ( Accountant member ) and Challa Nagendra Prasad, ( Judicial Member ) hold that the subject matter is squarely covered by the judgment of Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs. CIT
Therefore receipts from sale/distribution of software to Indian Associate Enterprise ( AE ) are not taxable under the Article 12(3) of India-Singapore DTAA,.
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