Taxability of Software Fee under India-UAE DTAA: Karnataka HC Disposes Revenue's Appeal after AO Treats Receipts as Royalty [Read Order]
During the pendency of the appeal, the Assessing Officer passed an order holding that the receipt of Rs.13.26 crores was royalty under Section 9(1)(vi)
India - UAE - DTAA - Taxscan
India - UAE - DTAA - Taxscan
The High Court of Karnataka, disposed of the Revenue’s appeal on the taxability of software fees under the India-UAE Double Taxation Avoidance Agreement (DTAA) after the Assessing Officer (AO) treated the receipts of Rs.13.26 crores as royalty.
The Revenue-appellant, challenged the order of the Income Tax Appellate Tribunal (ITAT) Bengaluru Bench, dated 08.02.2024, for the assessment year 2016-17. In this case, Oasis Centre LLC, respondent-assessee was a foreign company in the UAE engaged in operating and managing shopping malls.
For the assessment year 2016-17, it received Rs.13.26 crores as Oracle licence fee from its group entities and filed a return declaring ‘NIL’ income. The AO treated the assessee as the owner of the software licence and treated the payment as “royalty” under Section 9(1)(vi) of the Income Tax Act. On appeal, the Commissioner (Appeals) allowed the claim.
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The ITAT, following the Supreme Court’s ruling in Engineering Analysis Centre of Excellence Pvt. Ltd., remanded the matter to examine taxability under the India-UAE DTAA. The Revenue, aggrieved by this remand, filed an appeal before the High Court.
The Revenue counsel argued that the Supreme Court’s ruling in Engineering Analysis Centre of Excellence Pvt. Ltd. did not apply and that the entire receipt was taxable as royalty under Section 9(1)(vi), making the remand unnecessary.
The respondent’s counsel pointed out that the AO had already passed an order on 31.05.2024 treating the receipt of Rs.13.26 crores as royalty, and therefore the challenge to the remand no longer survived.
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Justice S.G Pandit and Justice K.V Aravind considered the appeal and submissions of both sides. The Revenue had challenged the tribunal’s remand directing the AO to examine the taxability of software fees under the India-UAE DTAA.
During the pendency of the appeal, the AO passed an order holding that the receipt of Rs.13.26 crores was royalty under Section 9(1)(vi). Since the issue was already decided in the remand proceedings, the challenge did not survive.
The Court disposed of the appeal without answering the questions raised.
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