Characterisation of software payments as royalty - appeal admitted solely to decide whether such payments qualify as royalty under tax law.

Question whether royalty is taxable on a receipt basis is precluded from re consideration because the same issue was previously decided for the assessee in favour of the assessee; consequently that issue is not entertained. The appeal is admitted solely on the discrete legal question whether payments for software constitute 'royalty' under the applicable domestic law and the India Germany DTAA, with the matter directed to be heard together with a related appeal; the appeal remains pending for determination of that characterisation issue.

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Issues: (i) Whether question (a) (taxability of royalty under India-Germany DTAA on receipt basis) can be entertained in this appeal; (ii) Whether the appeal should be admitted for decision on whether payments for software constitute royalty (question (c)).

Issue (i): Whether question (a) is open for consideration in this appeal.

Analysis: The Court noted that question (a) is covered in favour of the assessee and against the Revenue by this Court's earlier decision dated 22 November 2012 in the assessee's own case (Income Tax Appeal No. 124 of 2010) and that parties so agreed.

Conclusion: Question (a) cannot be entertained in this appeal.

Issue (ii): Whether the appeal should be admitted on the question whether payments for software are royalty (question (c)).

Analysis: The Court observed that question (b) is a facet of question (c) and admitted the appeal limited to question (c) for decision; the matter was directed to be heard along with Income Tax Appeal No. 1458 of 2010.

Conclusion: The appeal is admitted only on question (c).

Final Conclusion: The Court has declined to reopen the issue covered by its prior decision in favour of the assessee and has permitted the Revenue's appeal to proceed solely on the discrete question of whether payments for software constitute royalty under the Income-tax Act and the India Germany DTAA; the appeal remains pending for further hearing.

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