Treatment of consideration received for sale of software as 'royalty'

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

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER

IT(IT)A No.3234/Bang/2018
Assessment year: 2015-16

Autodesk Asia Pte Limited,
[3, Fusionopolis Way,
# 10-21 Symbiosis,
Singapore – 138633.]

C/o. Autodesk India Pvt. Ltd.
Unit A-4, ‘A’ Wing, 2nd Floor,
Divyasree Chambers,
Langford Road,
Bangalore.
PAN: AAFCA 6398D
APPELLANT 

Vs. 

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

Appellant by : Shri T. Suryanarayana, Advocate
Respondent by : Shri Muzaffar Hussain, CIT(DR)(ITAT), Bengaluru.

Date of hearing : 12.07.2021
Date of Pronouncement : 12.07.2021

O R D E R

Per Chandra Poojari, Accountant Member

 This appeal by the assessee is directed against the order of the Assessing Officer dated 28.11.2017 passed u/s. 143(3) r.w.s. 144C of the Income-tax Act, 1961 [the Act].

2. The following grounds of appeal are raised by the assessee:- 

3. The assessee is a Singapore based company, a subsidiary of Autodesk US and the headquarters for Asia-Pacific (APAC) region. It is engaged in the business of manufacturing, designing and supporting computer software and related Autodesk products in the APAC region. It performs or manages activities related to Autodesk’s products and services including R&D, localization, manufacturing, order processing and distribution operations and sale & marketing activities. It also provides management, marketing, accounting, finance, legal and information technology support services for the Asia Pacific region. The assessee has established regional offices in Malaysia, Thailand, Philippines, Indonesia and Vietnam. The assessee is responsible for all aspects of software duplication, packaging, materials, purchasing, quality control and testing, shipping and warehousing for the Asia-Pacific region. In respect of Autodesk software technology, it licenses the rights to Autodesk US’s core product software technology from the parent company and manufactures and sells the product in the Asia-Pacific region.

4. During the year under consideration, the assessee company sold software licenses along with associated hardware to Indian customers and in connection with the same also provided certain ancillary services. The AO treated this income as royalty after the directions from the DRP. 

5. We have heard both the parties and perused the material on record. This issue is squarely covered by the judgment of Hon’ble Supreme Court in the case of ENGINEERING ANALYSIS CENTRE FOR EXCELLENCE PRIVATE LIMITED VS COMMISSIONER OF INCOME TAX & ANOTHER – AIR 2021 SC 124 / 432 ITR 471 (SC). The Apex Court in the aforesaid case has held in paragraphs 27, 47, 52, 168 to 170 as under:

To know more in details find the attachment file