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2018 (4) TMI 172 - AT - Income TaxSupply of software embedded in the hardware - whether it result in to royalty income? - allowable business income - attribution to the income of PE in India - Held that:- The transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.’ This insertion of the Explanation has the effect of including supply of computer software within the ambit of `Royalty’. However, when a software is embedded in hardware and there is one composite price, the entire amount remains as Business income and a part of the same cannot be considered as royalty within the Explanation 4. Payment received for software, which is embedded in the hardware, has to be treated as business profits, which is of the same nature as from the supply of hardware. The impugned order is set aside to this extent and the AO is directed to compute the income of the assessee afresh by considering income from supply of software embedded in hardware as Business profits.
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