INCOME TAX ACT, 1961

Section 9 Article 12

Double Taxation Relief - Levy of tax on royalties or fees for technical services - Rate of tax under the Double Taxation Avoidance Agreement (DTAA) - Substituted

Assessee was engaged in business of marketing and sale of software and sold software licences to Indian customers and in connection with sale of software also provided certain ancillary services to Indian customers. Assessee showed turnover on sale of software licences and ancillary services, out of which 95% of software licences were sold to authorized distributors. AO on examination of the agreements and documents supplied by the assessee inter alia held that software supplied was chargeable to income tax from royalty and technical services. Assessee submitted that from perusal of Article 4 of the Notification dated 18-7-2015, it was evident that Article 12 of DTAA was deleted and has been substituted by which provides for levy of tax on royalties or fees for technical services at the rate not exceeding 10%. Held: It was evident that Article 12 provides for levy of tax on royalties or fees for technical services at the rate not exceeding 12% was deleted and in its place, the provision which provides for levy of tax on the royalties or fees for technical services at the rate not exceeding 10% has been substituted. Thus, substitution has the effect of deleting the old rule and making the new rule operative. Therefore, Tribunal had rightly determined the rate of tax as substituted in Clause 2 of Article 12 of DTAA between India and Singapore applicable for the entire fiscal year as defined in DTAA and was liable to be taxed at 10%. Therefore, appeal filed by Revenue was dismissed.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2006-07

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