The Tax Publishers2020 TaxPub(DT) 2999 (Del-Trib)

INCOME TAX ACT, 1961

Section 90 Article 12(3)

Receipts on supply of CAS and Middleware software products along with limited supply of hardware equipment were not Royalty in view of beneficial provisions of article 12(3) of Indo-Swiss DTAA and amended definition of 'royalty' under domestic law could not be extended to definition of 'royalty' under DTAA, where the term 'royalty' originally defined had not been amended.

Double taxation relief - Agreement between India and Sweden - Royalty under Article 12(3) - Receipt on sale of Indian entity

Assessee based at Sweden earned revenue from supply of CAS and Middleware software products along with limited supply of hardware equipment to Indian entity. AO held the same to be in nature of royalty under section 9(1)(vi) and accordingly taxed the same.Held; Royalty as per article 12(3) of Indo-Swiss DTAA means payment received fro use of, or right to use any copyright. In the instant case, assessee had not transferred any copyright but had only parted with copyrighted article, in the form of software. Accordingly, receipts on supply of CAS and Middleware software products along with limited supply of hardware equipment were not Royalty in view of beneficial provisions of DTAA and amended definition of 'royalty' under domestic law could not be extended to definition of 'royalty' under DTAA, where the term 'royalty' originally defined had not been amended.

Relied:DIT v. Infrasoft Ltd. (supra) vide its decision dated 22-11-2013, Pr. CIT v. M. Tech India (P.) Ltd. (2017) 381 ITR 31 (Del.) : 2016 TaxPub(DT) 828 (Del-HC), Tata Consultancy Services v. State of Andhra Pradesh (2004) 271 ITR 401 (SC) : 2004 TaxPub(DT) 1920 (SC) and DIT v. Nokia Networks OY (2013) 358 ITR 259 (Del) : 2012 TaxPub(DT) 3208 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17

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