Software licence receipts not taxable as royalty or technical fees under the India-Singapore tax treaty

Receipts from sale of software licences and related maintenance services were held not taxable in India as fee for technical services or royalty under the Income-tax Act and Article 12 of the India-Singapore DTAA. The Tribunal followed its earlier order in the assessee's own case and the Supreme Court ruling in Engineering Analysis Centre of Excellence Pvt. Ltd., which held that consideration for resale or use of computer software is not royalty and does not create taxable income in India. On that basis, the software licence receipts could not be so characterised, and the addition was deleted.

---

---

Issues: Whether the receipts from sale of software licences and related maintenance services were taxable in India as fee for technical services or royalty under the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The issue was held to be covered by the decision in the assessee's own case for an earlier assessment year, which had followed the Supreme Court's ruling in Engineering Analysis Centre of Excellence Pvt. Ltd. That ruling concluded that consideration paid for resale or use of computer software under such arrangements is not royalty and does not give rise to taxable income in India. Applying the same reasoning, the receipts from software licence sales could not be characterised as fee for technical services or taxed as royalty.

Conclusion: The issue was decided in favour of the assessee, and the addition made on this account was directed to be deleted.

---