Fresh tax claim maintainable on appeal, while software royalty treatment required factual verification of copyright transfer.

A fresh legal claim on the taxability of receipts as royalty can be raised in appeal against an intimation under section 143(1) even where the return was processed without adjustment, because there is no estoppel against law and tax can be levied only by authority of law; the claim was held maintainable. Receipts from software sales were stated not to be royalty if the software was sold only as copyrighted articles without transfer of copyright, but that factual question had not been examined and was remitted to the AO for limited verification with an opportunity of hearing.

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Issues: (i) Whether a fresh claim challenging the taxability of receipts as royalty can be entertained in appeal against an intimation under section 143(1) of the Income-tax Act, 1961 when the returned income was accepted without adjustment; (ii) Whether receipts from sale of software products were liable to be treated as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement, warranting verification of whether the software was sold as copyrighted articles without transfer of copyright.

Issue (i): Whether a fresh claim challenging the taxability of receipts as royalty can be entertained in appeal against an intimation under section 143(1) of the Income-tax Act, 1961 when the returned income was accepted without adjustment.

Analysis: The return had been processed under section 143(1) without any variation, but the assessee raised the taxability issue in appeal. The decision recognizes that tax can be levied only by authority of law, and there is no estoppel against law. A taxpayer may raise a fresh claim before the appellate forum even if the return had earlier been filed on a different basis. The absence of an adjustment in the intimation did not bar consideration of the legal claim.

Conclusion: The fresh claim was held to be maintainable in appeal and was answered in favour of the assessee.

Issue (ii): Whether receipts from sale of software products were liable to be treated as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement, warranting verification of whether the software was sold as copyrighted articles without transfer of copyright.

Analysis: The factual question whether the software products were merely copyrighted articles sold without transfer of copyright had not been examined at any stage. The reasoning notes that, if the software was sold only as a copyrighted article without transfer of copyright, the receipts could not be characterized as royalty. The matter was therefore found fit for limited factual verification by the Assessing Officer, with an opportunity of hearing to the assessee.

Conclusion: The issue was restored to the Assessing Officer for limited examination, and no final finding on taxability as royalty was returned at this stage.

Final Conclusion: The assessee succeeded on the maintainability of the fresh claim, but the core royalty characterization issue was sent back for factual verification, so the appeal was disposed of by way of remand for statistical purposes.

Ratio Decidendi: A fresh legal claim affecting taxability can be raised in appeal even against an intimation under section 143(1), and receipts from software sales are not royalty if they relate only to copyrighted articles without transfer of copyright, a question requiring factual verification.

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