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2023 (10) TMI 836 - AT - Income TaxIncome taxable in India - taxability of amounts received from Indian customers towards sale of hardware along with software packages as royalty income - HELD THAT:- It is a fact on record that the assessee procures the hardware and software packages from non-resident vendors and re-sells them to Indian customers without any value addition, along with, warranty packages. The facts on record clearly reveal that what the assessee has sold to Indian customers is copyrighted articles and not use or right to use of any copyright. This is so because, the assessee procures hardware and software packages from other vendors and sells them to third party customers. Therefore, the ownership over copyright lies with the manufacturer and original supplier of software packages and not with the assessee. Therefore, the ratio laid down in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] will squarely apply to assessee’s case.Therefore, we uphold the deletion of additions made on account of royalty income. Receipts from Technical services/service charges received - whether taxable as Fees for Technical Services u/s 9(1)(vii) and Article 12(4) of India- Singpore DTAA ? - assessee is a non-resident corporate entity and a tax resident of Singapore - Undisputedly, though, the AO has not expressed in so many words, however, his observations clearly reveal that he has treated the receipts as FTS by applying Article 12(4)(a) of India-Singapore DTAA, which treats fee received for services which are ancillary and subsidiary to the royalty income as FTS. Once, it is held that the receipts from sale of hardware and software packages are not in the nature of royalty either under the provisions of the Act or under Treaty provisions, the case of the Assessing Officer in treating the service charges as FTS under Article 12(4)(a) of the treaty is bound to fail. Therefore, we uphold the decision of learned first appellate authority in deleting the additions made on account of FTS. Though, learned first appellate authority has recorded his conclusive findings on applicability of Article 12(4)(b) and 12(4)(c) of India-Singapore DTAA to the service charges received by the assessee, however, since the AO has not examined these aspects in the respective assessment orders, we desist from dealing with these issues. However, the issues relating to applicability of Articles 12(4)(b) and 12(4)(c) of India- Singapore DTAA to the service charges are kept open for deliberation if they arise in future in appeals relating to any other assessment years. Revenue appeal dismissed.
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