2023 (1) TMI 464

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....ssing officer (Ld. AO)/Dispute Resolution Panel ('DRP') has_erred in holding that amount of Rs.46,80,538 received by the Appellant from Wipro Limited on account of sale of software/license charges is taxable as royalty under Article 12(3) of India-Israel Double Taxation Avoidance Agreement ('DTAA') and as per section 9(l)(vi) of the Act. 2 That Ld. AO has erred in not appreciating the fact that non-exclusive, non-transferable and terminable license has been granted by Appellant to Wipro. 3 That Ld. AO failed to appreciate that sale of such 'off shelf software by the Appellant is merely a sale of copyrighted article and has not resulted in transfer of any right in relation to a 'copyright' embedded in the said softw....

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....vying interest under section 234B and 234C of the Act, ignoring the fact that same are not applicable in Appellant's case." Apropos Ground No. 1 to 5 3. Brief facts of the case are that the assessee received the consideration on account of software sale in India. The same has been treated as business income, but not liable to tax in absence of Permanent Establishment ('PE') in India invoking Article 12 read with Article 7 of the 'India-Israel Double Taxation Avoidance Agreement' by the assessee. The AO treated the same as taxable as royalty under Article 12(3) of the India- Israel DTAA and as per section 9(1)(vi) of the Act. Upon assessee objections, the Ld DRP gave following observation:- "3.3 Term 'Royalty' has been....

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.... such transactions also. The AO validly treated it as 'Royalty' in view of the amended definition of Royalty per section 9 (l)(vi) of the Act read with explanations (explanation 2 in particular). The assessee has challenged this contention by referring to the definition of Royalty in the relevant DTAA. The assessee has also submitted the judgment by Hon'ble Delhi High Court in Director of Income Tax vs. Infrasoft Limited (264 CTR 329) on similar issues where relief has been granted to the assessee. It has been reported that the department is in appeal before Hon'ble Supreme Court (CC No 19034/2014) against the above referred judgment of Hon'ble Delhi High Court. It has to be borne in mind that the panel is an extension o....