Supreme Court reaffirms non-Taxable Nature of Receipts for Computer Software Access to Member Firms [Read Judgement]
The petition challenged the non-taxability of payments received for providing access to computer software to member firms
Supreme Court – non-Taxable Nature – Receipts – Computer Software Access – Member Firms – taxscan
Supreme Court – non-Taxable Nature – Receipts – Computer Software Access – Member Firms – taxscan
The Supreme Court has recently dismissed a Special Leave Petition (SLP) filed by the Commissioner of Income Tax (International Taxation), Income Tax Department against taxability of payments received in lieu of computer software access to member firms.
The Supreme Court bench of Justice B.R. Gavai and Justice K.V. Viswanathan upheld the Delhi High Court's ruling that the licensing of Microsoft's software products in India by the respondent-assessee is not taxable as "royalty" under Section 9(1)(vi) of the Income Tax Act, read in conjunction with Article 12 of the Indo-U.S. Double Tax Avoidance Agreement ( DTAA ).
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The appellant-Income Tax Department, filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT). The department contended that the ITAT erred in holding that the licensing of Microsoft's software products in India by the respondent was not taxable as royalty under the relevant provisions of the Income Tax Act and the Indo-U.S. DTAA.
The department argued that the Tribunal failed to appreciate that the distribution model used by the respondent involved making multiple copies of the software, which clearly indicated a transfer of copyright.
The Delhi High Court relied on the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr., where it was held that amounts paid by resident Indian end-users or distributors to non-resident computer software manufacturers or suppliers—as consideration for the resale or use of computer software through End User Licence Agreements (EULAs) or distribution agreements—do not constitute payment of royalty for the use of copyright in the software.
Read Full Story Here: Licensing of Microsoft Softwares in India is not Taxable as 'Royalty' as per Indo-US Treaty: Delhi HC
It was noted by the Delhi High Court that such payments do not result in income taxable in India, and the persons referred to in Section 195 of the Income Tax Act are not liable to deduct any Tax Deducted at Source (TDS) under that section.
Earlier in April, the Supreme Court had also held that Licensing of software products of Microsoft in Territory of India is not taxable in India, in a similar case.
To Read the full text of the Judgement CLICK HERE
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