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The assessee, a non-resident company incorporated in Singapore...

Software Licensing to L&T for Vizag Project Not Taxable as Royalty, Says ITAT; Ownership and Modification Rights Retained.

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Income Tax November 19, 2024 Case Laws AT
The assessee, a non-resident company incorporated in Singapore without a permanent establishment in India, received income from licensing of software to M/s. L&T Ltd. for the Vizag Smart City project. The End User License Agreement (EULA) clearly stated that no title or ownership of the software or its documentation was transferred to the buyer, and the ownership and modification rights remained with the assessee. Based on the facts and circumstances, the supply of software by the assessee to M/s. L&T Ltd. cannot be treated as royalty u/s 9(1)(vi) of the Income Tax Act or Article 12 of the India-Singapore DTAA. The decision relies on the Supreme Court's ruling in Engineering Analysis and Centre of Excellence Pvt. Ltd., as well as the Delhi High Court's judgments in CIT vs. Microsoft Corporation and EY Global Services Ltd., which held that mere supply of software without a sale of copyright cannot be treated as royalty for taxation purposes u/s 9(1)(vi). Following these precedents, the ITAT set aside the Assessing Officer's order, concluding that the supply of software by the assessee cannot be brought to tax under the Income Tax Act or the India-Singapore DTAA.

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Acts Income Tax