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of <h1>Software License Sales Not Taxable; Tribunal Rules in Favor of Assessee</h1> <h3>Veritas Storage [Singapore] Pte Ltd Versus The D.C.I.T Inttl. Taxation New Delhi</h3> Veritas Storage [Singapore] Pte Ltd Versus The D.C.I.T Inttl. Taxation New Delhi - TMI Issues:Assessment of receipt of sale of software licenses as 'Royalty' under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the DTAA between India and Singapore.Analysis:The appeal was filed against the order of the ld. CIT(A) assessing the receipt of sale of software licenses as 'Royalty' under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the DTAA between India and Singapore for Assessment Year 2016-17. The Assessing Officer found that the assessee had received an amount from the sale and maintenance services of software license but did not offer it for tax. The assessee contended that the income was not taxable in India based on the India-USA DTAA. The Assessing Officer, however, applied Explanation 2 to section 9(1)(vi) of the Act and taxed the receipts as royalty, dismissing the assessee's submissions and judicial decisions. The matter was taken to the ld. CIT(A) but was unsuccessful.The Tribunal referred to the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt Ltd., where it was held that payments made by resident Indian end-users/distributors to nonresident computer software manufacturers/suppliers for the resale/use of computer software through EULAs/distribution agreements did not amount to payment of royalty for the use of copyright in the software. As a result, such payments did not give rise to any income taxable in India. The Tribunal, following this decision, directed the Assessing Officer to delete the addition made, allowing the appeal of the assessee in ITA No. 9428/DEL/2019.Therefore, based on the Supreme Court's decision, the Tribunal ruled in favor of the assessee, stating that the receipts from the sale of software licenses were not taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the DTAA between India and Singapore.
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