Receipts from the sale of software with support services is not Royalty Income, clarifies ITAT

IN THE INCOME TAX APPELLATE TRIBUNAL
“A’’ BENCH: BANGALORE
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
 
IT(IT)A No.2542/Bang/2018
 IT(TP)A No.2812/Bang/2017
 Assessment Year: 2014-15 & 2015-16

CICSO Systems International
B.V,
C/o SRBE & Associates LLP
(Authorized Representative)
‘Divyashree Chambers,
Ground & First Floor, ‘A’
Wing,
#11, O’Shaughnessy Road,
Langfor Gardens,
Bengaluru-560 025.
PAN NO : AADCC 9201 D
APPELLANT 

Vs.

The Dy. Commissioner of
Income Tax, (International
Taxation)
Circle-1(1)
Bangalore.
RESPONDENT 

Appellant by : Shri Nageshwar Rao, Advocate.
Respondent by : Ms. Neera Malhotra,CIT. DR.

Date of Hearing : 17.06.2021
Date of Pronouncement : 02.07.2021

O R D E R

PER BEENA PILLAI, JUDICIAL MEMBER: 

Present appeals have been filed by assessee against the final assessment order is dated 27/10/2017 and 10/07/2018 passed by Ld.DCIT (International Taxation) Circle-1 (1), Bangalore. It has been submitted that the only issue raised by assessee in both these appeals relate to treating the receipts of assessee’s on account of sale of software to the Indian customers, as royalty.

2. It was submitted that during the relevant years under consideration assessee was also engaged in sale of tangible hardware is like routers, switches, optical network, storage area networking and home networking hardware. Assessee has also submitted that it has provided necessary support services to its customers in relation to the products supplied.

3. The Ld.AO treated the amount received by assessee as under section 9(1)(vi) of the Act, and under the DTAA between India and Netherlands as royalty on which TDs is liable to be deducted section 195 of the Act. The Ld.AO relied on the decision of Hon’ble Karnataka High Court in case of CIT vs Samsung Electronics Co Ltd., reported in (2011) 16 Taxmann.com 141, decision of AAR in case of Millennium ITA Software Ltd., Citrix Systems Asia Pacific Ltd., to come to the conclusion that the said receipts are taxable as royalty under the provisions of IT Act and India-Netherlands treaty.

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 dated 26/03/2021 decided the issue in favour of assessee. 

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