Software licensing receipts and royalty taxation: ITAT deleted additions where the income had already been taxed in another entity's hands.

Receipts from sale or licensing of software were treated as royalty in substance, but the additions could not survive in the assessee's hands because the same income had already been brought to tax in the hands of another entity in the distribution chain. Following its earlier decision on materially identical facts, the ITAT deleted the additions. The separate limitation ground for one assessment year was not pressed and was rejected without adjudication on merits.

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Issues: Whether the receipts from sale or licensing of software were taxable as royalty in the hands of the assessee for the assessment years in question.

Analysis: The dispute was held to be covered by the Tribunal's earlier decision on materially identical facts. The Tribunal had accepted that the receipts constituted royalty in substance, but had also held that the amount was not assessable again in the hands of the present assessee because it had already been brought to tax in the hands of the other entity in the distribution chain. Following that binding view, the addition made in the assessee's hands could not be sustained. The separate ground regarding limitation for one assessment year was not pressed and was therefore rejected without adjudication on merits.

Conclusion: The receipts were not assessable as royalty in the hands of the assessee, and the additions were deleted. The appeal for one year was allowed partly and the appeal for the other year was allowed.

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