Payments for Software Licenses, Hardware, and Support Services not Royalty under India-UK DTAA: Karnataka HC dismisses Revenue’s appeal [Read Order]
The issue was already settled by the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd.There was no evidence of any transfer of IPR allowing the assessee’s customers in India to use it commercially
Software - Hardware - india-UK DTAA - Karnataka HC - Revenue appeal - taxscan
Software - Hardware - india-UK DTAA - Karnataka HC - Revenue appeal - taxscan
The High Court of Karnataka, dismissed the Revenue’s appeal, holding that payments received by a UK-based company for software licenses, hardware supply, and support services were not royalty under the India-UK Double Taxation Avoidance Agreement (DTAA), as no transfer of copyright or intellectual property rights occurred.
The Revenue-appellant, had filed an appeal under Section 260A of the Income Tax Act, 1961, against the ITAT’s common order dated 13.12.2023. In this case,Syna Media Limited,respondent-assessee, had filed an appeal against the order dated 27.09.2023 of the ITO (International Taxation), Bengaluru, for AY 2021-22. The UK-based company had received ₹14,27,24,656/- from customers during the year.
It claimed the amount was not taxable, but the AO treated it as royalty under the India-UK DTAA since it related to software licenses, hardware supply, and support services. The company was engaged in providing video solutions for cloud services, IPTV, DTH, cable, and OTT platforms.
The assessee had entered into an agreement withDigital Entertainment Networks Private Limited ( DEN ) granting a non-exclusive, non-transferable licence to use its NDS software, NDS hardware, and certain third-party software and hardware under specific terms. The AO noted that DEN could maintain two backup copies for disaster recovery, as permitted by law.
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Similar agreements were executed with other customers. Since no copyright or intellectual property rights (IPR) were transferred, the ITAT had held that the receipts could not be considered as royalty.AO not competent to pass Draft Assessment Order u/s 144C(1) of Income Tax Act when TPO Makes no Variation: Bombay HC [Read Order]Chief Justice Vibhu Bakhru and Justice C M Joshi held that the issue was already settled by the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. There was no evidence of any transfer of IPR allowing the assessee’s customers in India to use it commercially. Similar appeals for AY 2012-13 and AY 2014-15 were dismissed by a Co-ordinate Bench.
The Court found no substantial question of law and dismissed the appeal, disposing of the pending application as well.
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