Off-the-shelf software receipts not taxable as royalty; consequential receipt differences also deleted, while reimbursement issue was remanded.

Amounts received for granting users rights in off-the-shelf software and for standard facilities and support services were held not taxable as royalty because materially identical receipts in earlier years had already been found outside royalty taxation, and the deletion of the addition followed. The reimbursement claim was not finally adjudicated on the merits; it was remanded for fresh consideration after the assessee was given a reasonable opportunity to place supporting evidence. The difference between Form 3CEB figures and the software receipts was also deleted because, once the underlying software receipts were held not taxable, the differential amount could not be taxed separately.

---

---

Issues: (i) Whether amounts received for providing users a right in off-the-shelf software and for standard facilities and support services were taxable as royalty; (ii) whether the reimbursement claim of Rs. 3.38 crore was taxable as fees for technical services; (iii) whether the difference between Form No. 3CEB figures and the receipt shown towards off-the-shelf software charges was taxable.

Issue (i): Whether amounts received for providing users a right in off-the-shelf software and for standard facilities and support services were taxable as royalty.

Analysis: The same receipts had been examined in the assessee's own earlier years and were held not to constitute royalty chargeable to tax. The facts for the year under appeal were found to be materially similar, and the earlier view was followed.

Conclusion: The receipts were not taxable as royalty, and the addition was deleted in favour of the assessee.

Issue (ii): Whether the reimbursement claim of Rs. 3.38 crore was taxable as fees for technical services.

Analysis: The claim was rejected by the Assessing Officer for want of documentary support, while the assessee sought an opportunity to place evidence on record. In the interests of justice, the matter was set aside for fresh adjudication after giving a reasonable opportunity of hearing.

Conclusion: The issue was remanded to the Assessing Officer for de novo consideration.

Issue (iii): Whether the difference between Form No. 3CEB figures and the receipt shown towards off-the-shelf software charges was taxable.

Analysis: The assessee did not reconcile the discrepancy in receipts, so the difference was treated as an under-reported amount. However, since the underlying software receipts were held not taxable, the differential amount could not be taxed separately.

Conclusion: The addition on account of the difference was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded on the royalty and consequential receipt issues, while the reimbursement issue was reopened for fresh decision by the Assessing Officer, resulting in a partial allowance of the appeal.

Ratio Decidendi: Amounts received for off-the-shelf software rights and related standard support services are not taxable as royalty where earlier coordinate decisions on materially identical facts have so held, and consequential differences in receipts cannot be separately taxed once the underlying receipt is held not chargeable.

---