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2008 (12) TMI 245 - AT - Income TaxDTAA between UK and India - Sale of software - payment received by the assessee under the license agreement for allowing use of the software - chargeable to tax under Article 7 of DTAA as business income of the assessee OR not under Article 12 as ‘Royalty’ - PE in the form of branch office in India. HELD THAT:- We are of the view that the issue involved in the present case relating to nature of software receipts is squarely covered by the decisions of Tribunal in the cases of Motorola Inc. [2005 (6) TMI 226 - ITAT DELHI-A] and Samsung Electronics Co. Ltd. [2005 (2) TMI 438 - ITAT BANGALORE-A] and respectfully following the same, we hold that the amount received by the assessee under the license agreement for allowing use of the software was not 'royalty' either under the IT Act or under DTAA. We also hold that the other receipts on account of maintenance charges and training fees being incidental to the software receipts assume the same character as that of software receipts and the same are liable to be taxed accordingly. We therefore, set aside the order of the CIT(A) on this issue and restore the matter to the file of the AO with a direction to reframe the assessment in view of our decision on the preliminary issue that the payment received by the assessee company against software licensed was not in the nature of royalty but was in the nature of business profits chargeable to tax in its hands under art. 7 of the DTAA. As we have restored the matter to the file of the AO for framing the assessment afresh keeping in view our decision on the preliminary issue relating to the taxability of the software payments, we do not deem it necessary or expedient to adjudicate upon the remaining grounds raised by the assessee in this appeal which are mainly consequential in nature. In the result, the appeal of the assessee is treated as allowed.
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