Is payment for the purchase of software treated as Royalty under the Income Tax Act?

IN THE INCOME TAX APPELLATE TRIBUNAL
“B’’ BENCH: BANGALORE

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

 IT(IT)A No.1514/Bang/2019
 Assessment Year: 2013-14

NICE Netherlands B.V.
(Successor in interest of
Cyber Tech B.V.)
Comeniusstraat 5, 1817 MS
Alkmaar.
PAN NO : AAECC 7877 N
APPELLANT 

Vs.

The Jt. Commissioner of
Income-tax (International
Taxation)
Circle-1(2)
Bangalore.
RESPONDENT

Assessee by : Shri Aliasger Rampurawala, C.A
Revenue by : Shri Priyadarshi Mishra, Addl. CIT (DR)

Date of Hearing : 22.06.2021
Date of Pronouncement : 02.07.2021 

O R D E R

PER BEENA PILLAI, JUDICIAL MEMBER:

 Present appeal has been filed by assessee against order dated 30/03/2019 passed by Ld.CIT(A)-12.

2. Admittedly, assessee had purchased the software from a company located in Israel. The Ld.AO took a view that payment made for purchase of software was in the nature of royalty and that assessee was required to deduct TDS while making such payment.

3. The Ld.AO following the decision of Hon’ble Karnataka High Court in case of CIT vs Samsung Electronics Co. Ltd., reported in (2011) 16 Taxmann.com 141, held that, payment made by assessee to the non-resident company would amount to royalty within the meaning of Article 12 of Indo Israel DTAA and there was an obligation on the part of assessee to deduct tax at source under section 195 of the Act.

4. At the outset both sides submitted that the issue raised on merits in the present appeal now stands squarely covered by the decision of Hon’ble Supreme Court in case of Engineering Analysis Centre for Excellent Pvt.Ltd vs CIT reported in (2021) 125 Taxmann.com 42.

5. The Ld.AR submitted that, following the decision of Hon’ble Supreme Court, Hon’ble Karnataka High Court in assessee’s own case for assessment year 2011-12, in ITA No. 7/2019 by order dated 26/03/2021 decided the issue in favour of assessee.

6. We have perused submissions advanced by both sides in light of records placed before us.

7. We note that the facts and for assessment year 2011-12 decided by Hon’ble Karnataka High Court in assessee’s own case are similar to the present facts before us. The question of law considered by the Hon’ble jurisdictional High Court in assessee’s own case was as under:

 “Whether the Tribunal was justified in confirming the order of assessment where under it came to be held that amount received by the assessee for sale of software amounting to royalty as defined under Explanation 2 to Section 9(1)(vi) of the Income tax Act, 1961 and under Section 12 of the IndiIsrael (DTAA) and thereby giving rise to an income chargeable
to tax in India?”

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