TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether receipts from sale of Microsoft software products to Indian distributors constituted royalty; (ii) Whether receipts from cloud services constituted royalty.
Issue (i): Whether receipts from sale of Microsoft software products to Indian distributors constituted royalty.
Analysis: The receipts were examined in the light of the India-USA DTAA, section 9(1)(vi) of the Income-tax Act, 1961, and the governing principle that sale of software distributors' products amounts to sale of a copyrighted article and not transfer of copyright. The conclusion was informed by binding precedent that such consideration does not amount to royalty.
Conclusion: The receipts from sale of software products did not constitute royalty and were not taxable as such in India.
Issue (ii): Whether receipts from cloud services constituted royalty.
Analysis: The cloud services were found to be online access services where the subscriber did not obtain any right to reproduce the software or any transfer of rights in the underlying process, equipment, or infrastructure. The subscription fee was treated as consideration for access to the service rather than for use of, or right to use, copyright, patents, or scientific equipment within the royalty provisions.
Conclusion: The receipts from cloud services did not constitute royalty and were not taxable as such in India.
Final Conclusion: The additions treating the software-sale and cloud-service receipts as royalty were unsustainable, and the assessee succeeded on the substantive grounds argued.
Ratio Decidendi: Consideration for sale of software as a copyrighted article, and for online cloud access without transfer of any exploitable rights in copyright, equipment, or process, does not amount to royalty under the Income-tax Act, 1961 or the India-USA DTAA.
TaxTMI 
