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2022 (8) TMI 1418 - AT - Income TaxTaxability of foreign income in India - Taxability of revenue from sale of software Royalty receipts - HELD THAT:- As decided by ITAT in assessee’s own case for AY 2012-13 [2022 (4) TMI 966 - ITAT DELHI] sale of software products does not give rise to royalty income as laid down in Infrasoft Ltd. case [2013 (11) TMI 1382 - DELHI HIGH COURT] which have now further been affirmed by the Hon’ble Supreme Court of India in the case of Engineering Analysis Centre of Excellence P. Ltd. [2021 (3) TMI 138 - SUPREME COURT] Taxability of cloud based service receipts - treating subscription to cloud base service as royalty - HELD THAT:- As decided in own case [2022 (4) TMI 966 - ITAT DELHI] the cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer. The assessee’s cloud base services are though based on patents / copyright but the subscriber does not get any right of reproduction. The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through internet to the provider’s system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software - Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications.the Bench is of considered view that the ld. Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty income. Hence respectfully following the precedent from coordinate Bench, we set aside the order of Revenue authorities and decide the issues in favour of the assessee.
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