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Tax Publishers Symantec Asia Pacific Pte. Ltd. v. DCIT [ITA No. 1000/Del/2017, dt. 31-8-2020] : 2020 TaxPub(DT) 3506 (Del-Trib) Software licence fees -- Whether royalty under Indo-Singapore DTAA -- Unilateral taxation under IT Act without amending DTAA provisions *Facts:* Assessee a non-resident of Singapore was in receipt of software licence fees. It was claimed that they did not have any PE in India thus the said software licence cannot be taxed as business income. Revenue however claimed the software licence to be royalty as per the amended provisions and subjected it to tax under section 9(1)(vi) which was upheld by the DRP. Aggrieved assessee went in higher appeal to ITAT - Held in favour of the assessee that the software licence fee was not royalty within the definition of DTAA between India and Singapore. The grounds raised by the assessee and the ITAT verdict are - 1. The said software was sale of a copyrighted article thus was not royalty. 2. It did not "make available" any process or technology for further exploitation. 3. Licence was limited only to end use. 4. Treaty definition of royalty was much smaller than the IT Act. 5. Treaty override warrants that the IT Act definition be limited to what is envisaged to be taxed within the treaty and not more. 6. Amending only IT Act without amending DTAA would mean a unilateral taxation without consenus of the other state which is incorrect as per DTAA terms and conditions. *Applied :* DIT v. Infrasoft Ltd. (2014) 264 CTR 329 (Del.) : 2014 TaxPub(DT) 0079 (Del-HC) Nagravision S.A. v. ACIT in ITA No. 9130/Del/2019 vide Order, dated 6-7-2020 : 2020 TaxPub(DT) 2999 (Del-Trib) Delhi itself in DIT v. Ericsson A.B. (2012) 343 ITR 470 (Del) : 2012 TaxPub(DT) 0020 (Del-HC) DIT v. Nokia Networks OY (2013) 358 ITR 259 (Del) : 2012 TaxPub(DT) 3208 (Del-HC) MOL Corporation & Ors., in ITA Nos. 6089 to 6091/Del/2012, Order, dated 26-9-2016 John Deere India Pvt. Ltd. v. DDIT in ITA Nos. 905 & 906/PUN/2015 vide Order, dated 23-1-2019 : 2019 TaxPub(DT) 1721 (Pune-Trib) *Read into:* Motorola Inc. v. DCIT (2005) 147 Taxman 39 (Delhi) : 2005 TaxPub(DT) 1677 (Del-Trib) Decision in Gracemac Corporation v. ADIT (2010) 134 TTJ 257 (Del.) : 2010 TaxPub(DT) 2316 (Del-Trib) is no longer good law.

Tax Publishers

Symantec Asia Pacific Pte. Ltd. v. DCIT [ITA No. 1000/Del/2017, dt. 31-8-2020] : 2020 TaxPub(DT) 3506 (Del-Trib)

Software licence fees -- Whether royalty under Indo-Singapore DTAA -- Unilateral taxation under IT Act without amending DTAA provisions

Facts:

Assessee a non-resident of Singapore was in receipt of software licence fees. It was claimed that they did not have any PE in India thus the said software licence cannot be taxed as business income. Revenue however claimed the software licence to be royalty as per the amended provisions and subjected it to tax under section 9(1)(vi) which was upheld by the DRP. Aggrieved assessee went in higher appeal to ITAT -

Held in favour of the assessee that the software licence fee was not royalty within the definition of DTAA between India and Singapore.

The grounds raised by the assessee and the ITAT verdict are -

1. The said software was sale of a copyrighted article thus was not royalty.

2. It did not "make available" any process or technology for further exploitation.

3. Licence was limited only to end use.

4. Treaty definition of royalty was much smaller than the IT Act.

5. Treaty override warrants that the IT Act definition be limited to what is envisaged to be taxed within the treaty and not more.

6. Amending only IT Act without amending DTAA would mean a unilateral taxation without consenus of the other state which is incorrect as per DTAA terms and conditions.

Applied :

DIT v. Infrasoft Ltd. (2014) 264 CTR 329 (Del.) : 2014 TaxPub(DT) 0079 (Del-HC)

Nagravision S.A. v. ACIT in ITA No. 9130/Del/2019 vide Order, dated 6-7-2020 : 2020 TaxPub(DT) 2999 (Del-Trib)

Delhi itself in DIT v. Ericsson A.B. (2012) 343 ITR 470 (Del) : 2012 TaxPub(DT) 0020 (Del-HC)

DIT v. Nokia Networks OY (2013) 358 ITR 259 (Del) : 2012 TaxPub(DT) 3208 (Del-HC)

MOL Corporation & Ors., in ITA Nos. 6089 to 6091/Del/2012, Order, dated 26-9-2016

John Deere India Pvt. Ltd. v. DDIT in ITA Nos. 905 & 906/PUN/2015 vide Order, dated 23-1-2019 : 2019 TaxPub(DT) 1721 (Pune-Trib)

Read into: Motorola Inc. v. DCIT (2005) 147 Taxman 39 (Delhi) : 2005 TaxPub(DT) 1677 (Del-Trib)

Decision in Gracemac Corporation v. ADIT (2010) 134 TTJ 257 (Del.) : 2010 TaxPub(DT) 2316 (Del-Trib) is no longer good law.