Sale of Software to Indian Resellers / Distributors not amount to ‘Royalty’ as per Income Tax Act and Indo-USA Treaty: ITAT
The Delhi bench of the ITAT comprising Sh. R. K. Panda, Accountant Member & Sh. Anubhav Sharma, Judicial Member has held that the payment received on sale of software to India resellers/distributors is not in the nature of “Royalty” chargeable to tax u/s 9(1)(vi) of the Income Tax Act, 1961 and under Article 12 of the India-USA DTAA.
The assessee, Attachmate Corporation, is a company incorporated in the United States of America (USA) and is engaged in the business of developing, manufacturing and distribution of software products. The assessee has entered into International Distributor/Reseller Agreements with distributors in India for supplying software products and for providing ancillary support services. It filed its return of income on 30 .09.2015 declaring Nil income.
During the course of assessment proceedings, the AO noted that the assessee has received an amount of USD 828170 which is from supply of software products to the end customers in India. After concluding the proceedings, the Assessing Officer held that payment received from the Indian distributors/resellers towards sale of software license is “Royalty”, the AO held that the revenue received by the assessee from the sale of software amounting to Rs.4 ,53,68 ,924/- is to be treated as income from “Royalty” to be taxed @ 15% as per Article 12 of India-USA DTAA.
The bench after considering the judicial precedents including the Tribunal order in the case of the assessee, held that “since the facts of the instant case are identical to the facts of the case decided by the Tribunal in assessee’s own case for the immediately preceding assessment year, therefore , respectfully following the decision of the Tribunal and in absence of any contrary material brought to our notice by the ld. CIT DR , we hold that the payment received by the assessee on sale of software to India resellers/distributors is not in the nature of “Royalty” chargeable to tax u/s 9(1)(vi) of the I.T. Act and under Article 12 of the India-USA DTAA. The ground nos. 2 to 8 of the assessee are accordingly allowed.”
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