Software sale receipts not taxable as royalty where prior coordinate bench rulings covered the same facts

Receipts from sale of shrink-wrap software were held not taxable as royalty under Explanation 2 to section 9(1)(vi) of the Income-tax Act. The Tribunal followed coordinate bench decisions in the assessee's own earlier years, finding no material factual distinction for the year under review. On that basis, it concluded that the software sale receipts could not be brought to tax as royalty and decided the issue in favour of the assessee and against the Revenue.

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Issues: Whether receipts from sale of software products were taxable as royalty under Explanation 2 to section 9(1)(vi) of the Income-tax Act, 1961.

Analysis: The Tribunal noted that the identical question had already been decided in the assessee's own case for earlier assessment years in favour of the assessee. Following those coordinate bench decisions, and the view that receipts from sale of shrink-wrap software were not exigible to tax as royalty, the Tribunal held that the present year involved no material distinction on facts. The receipts were therefore not liable to be brought to tax as royalty.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

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