The Income Tax Appeals Tribunal (ITAT) in Pune has ruled that the income from the sale of a software license cannot be treated as “royalties” for the purposes of the Law. 1961 income tax.
The appraisal agent, while concluding the appraisal procedure against the appraised, noted that Rs.86,05,13,407 / – was received by the latter as income from the sale of the software license. . He was of the opinion that income in the nature of “royalty” and taxable under the relevant provisions of the Income Tax Act, 1961.
While ruling in favor of the assessed based on precedents and decisions of the Tribunal over the past few years, Judicial Member Partha Sarathi Chaudhuri and Accountant Member RS Syal held that receipt of a software license s ‘amounting to Rs.86,05,13,407 / – cannot be taxed as “royalties” under the DTAA.
Likewise, the amount will escape taxation as ‘business profits’ under section 7, also because it has no PE in India. Although explanation 4 of Article 9 (1) (vi) is applicable to the year in question, but Article 90 (2) of the law states that when the central government has entered into an agreement with the government of any country other than India by virtue of sub-section (1), then, with respect to the assessed person to whom such an arrangement applies, the provisions of this Law shall apply in the extent to which they are more advantageous for that person being evaluated. In other words, the provisions of the Law or of the DTAA, whichever is the most advantageous for the assessor, would apply. Going back to the factual panorama, we find that the provision of the DTAA, being more advantageous than that of the law, would apply to make the receipt for the sale of the software license tax-free in India, ”the court said. .
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