The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) held that receipts from sale of software license is not royalty under Article 12(3) of India Singapore Double Taxation Avoidance Agreement.
The appeal is filed by the revenue by challenging the order of the CIT(A) in holding that the receipts by the assessee, Newspage Pvt. Ltd from Pepsico India Holding Ltd. and ITC Limited on account of sale of software license is not royalty within the meaning of Article 12(3) of India Singapore DTAA.
Sanjay Kumar, Assesee representative, Madhur Agrawal relied upon the decision of the Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT argued that the payments made towards sale of software whether stand alone or embedded not resulting in use of copyright in the software by the payer does not amount to royalty in the hands of foreign software supplies in view of beneficial provisions of the applicable tax treaty and consequently such payments are not taxable in the hands of non-resident payee in India.
Nikhil Tiwari, the Department representative, strongly placed reliance on the orders of the authorities below.
The tribunal observed that receipts by way of sale of software license and receipts from provisions of services cannot be assessed as royalty/FTS income in the hands of the assessee.
After observing the submissions of both parties the two-member bench of G.S. Pannu, ( Vice President ) and Challa Nagendra Prasad, ( Judicial Member ) by determining the decision of Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT held that software license and receipts from provisions of services cannot be assessed as royalty/FTS in the hands of the assessee.
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