Software receipts not taxable as royalty or technical fees after Engineering Analysis; Revenue addition failed.

Receipts from software product sales and ancillary support services were analysed against the Supreme Court's ruling in Engineering Analysis Centre for Excellence Pvt. Ltd., which held that such software receipts are not taxable as royalty and displaced the earlier jurisdictional High Court view. The note also records that the assessee's earlier years had been decided on the same basis and that the Revenue's review petition had been dismissed, confirming the finality of that legal position. On that footing, the software sales could not be taxed as royalty and the support services could not be treated as fees for technical services; the addition was stated to be unsustainable and the Revenue's appeal to have failed.

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Issues: Whether receipts from sale of software products and ancillary support services were chargeable to tax in India as royalty or fees for technical services.

Analysis: The assessee's receipts were examined in the light of the Supreme Court's ruling in Engineering Analysis Centre for Excellence Pvt. Ltd., which had reversed the earlier jurisdictional High Court view relied upon by the Assessing Officer. The Tribunal also noted that the assessee's own earlier years had been decided on the same footing and that the Supreme Court review petition filed by the Revenue had been dismissed, giving finality to the legal position. In these circumstances, the sale of software could not be taxed as royalty and the ancillary support services could not be treated as fees for technical services.

Conclusion: The addition made by treating the software sales and support service receipts as royalty and fees for technical services was not sustainable, and the Revenue's appeal failed.

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