TaxTMI 
TaxTMI 
2025 (9) TMI 745
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....y the assessee/appellant on sale of software and incidental services (software support and maintenance services) to the end customers in India taxable as royalty under the Act and Article 12 of India- Ireland Double Tax Avoidance Agreement (DTAA). 3. Narrating facts of the case, the ld. Counsel submits that the assessee is headquartered in Ireland and is a tax resident of Ireland. Its business activities are entirely carried out from outside India. The assessee develops a software solution. During the period relevant to assessment year under appeal, the assessee has provided software and related services to its Indian customer-PNB MetLife India Insurance Company Ltd. (in short 'PNB MetLife') for a total consideration of Rs. 3,56,51,494/-. The Indian customer deducted Tax at Source (TDS) Rs. 92,93,382/- on the payments made to the assessee. As per the assessee aforesaid amount received by the assessee is not taxable in India. The assessee filed its return of income for the AY 2021-22 declaring NIL income and claiming refund of the TDS amount appearing in Form No. 26AS. 3.1. In scrutiny assessment proceedings, the Assessing Officer (AO) held the receipts of the assessee from In....
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.....) Ltd. v. CIT 432, ITR 471. 6 The ld. Counsel further submitted that the AO has selectively and incorrectly read the agreement to conclude that the assessee has transferred access rights to its customers and charges fees in return for access rights. He reiterated that assessee has licensed standard software which is not specifically made for the Indian customer. He pointed that Clause 6 of MPA clearly states that intellectual property rights contained in the software shall continue to be suppliers (the assessee's) property. The assessee only grants a revocable, non exclusive and non transferable license to use software as mentioned in SOW. The consideration received for grant of right to use the copy righted software does not fall within the definition of royalty as per India-Ireland DTAA. 7. In respect of ground no. 5 of appeal, the ld. Counsel submits that without prejudice to the submissions on ground no. 3 and 4, the assessee has assailed final assessment order as the AO has erred in not following the directions of the DRP to allow credit of equalization levy paid at 2% against the Income Tax payable on the amount assessed as royalty. The assessee has already disclharged....
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....ity of assessment order on the ground of limitation. In light of statement made by ld. Counsel for the assessee, ground no. 2 of appeal is dismissed as not pressed. 13. The assessee is an Irish company holding TRC of Ireland, the assessee develops software solutions for insurance sector. During the period relevant to assessment year under appeal, the assessee provided standard software and related services to PNB MetLife for an aggregate consideration of Rs. 3,56,51,494/-. The stand of the assessee is that the aforesaid amount received by the assessee is not exigible to tax in India as the assessee has merely sold standard software to the Indian company. Hence, the case of assessee is squarely covered the decision rendered in the case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT (supra). Whereas, the Revenue has held that the aforesaid payment received by the assessee is in the nature of royalty as it is not simplicitor sale of software to an Indian company, the assessee is providing access to customer in India to certain software applications in its website and also provides services to implement the software applications into customer's website. 14. To deci....
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....he same to resident Indian end-users. (iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users. (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users." 16.1. After examining the MPA, we are of considered view that the assessee falls under category (i) i.e. the computer software purchased directly by the end user resident in India from a foreign non-resident supplier or manufacture. The Hon'ble Apex Court after detailed analysis of the definition of royalty as per section 9(1)(vi) of the Act and as per DTAA, referring to OECD commentary and after examining catena of decisions concluded as under:- "169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the comp....