INCOME TAX ACT, 1961

Section 9(1)(vi)

Income deemed to accrue or arise in India - Under section 9(1)(vi) - Sale of Software license - Whether taxable as royalty

The assessee, being a company, registered in U.S.A., did not file its return of income. AO initiated re-assessment proceedings under section 147 on the basis of information that the assessee had received a sum of Rs. 19,69,76,597 against sale of computer software which was taxable as royalty income. The AO passed assessment order, treating this receipt as income from royalty as per Explanation 4 to section 9(1)(vi), having trashed the assessee's contention that this receipt was, in fact, business profit and exempt from tax in India under DTAA. Held: On perusal of records, it transpired that the software licenses sold by the assessee were meant for internal business purpose of the users only and not for commercial exploitation and the assessee did not transfer any right in respect of the copyright in the said software and only right to use the software by the end-users. Thus, the sale proceeds are not to be treated as Royalty but business income. Besides, admittedly, the assessee did not have any Permanent Establishment (PE) in India. Thus, the business income of the assessee was not liable to be taxed in India. In view of the above, the addition of Rs. 19,69,76,597 was deleted.

Followed :Norton Lifelock Inc., earlier known as Symantec Corporation Vs. Dy. CIT (IT) 2021 TaxPub(DT) 0387 (Pune-Trib) Symantec Corporation, Pune Vs. Dy. CIT [ITA No.387/PUN/2017, dt. 5-4-2019]

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13 & 2017-18

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