2019 (2) TMI 1771 - AT - Income Tax

Income accrued in India - Taxability of receipts towards sale of software products as royalty under Explanation-2 to Section 9(i)(vi) - HELD THAT - We have gone through the orders of the Tribunal as cited by Ld. AR and Tribunal Order 2017 (3) TMI 331 - ITAT MUMBAI wherein the Tribunal have held that receipts from sale of Shrink-wrap software is not liable to tax in India accordingly, AO was directed to delete the addition so made on account of receipts for sale of Shrink-wrap software. Facts and circumstances in both the years under consideration are parimateria, therefore, respectfully following the order of the Tribunal in assessee s own case, we do not find any justification for taxing the receipt as taxable as royalty. - Appeals of the assessee are allowed.

Summary

Issues Involved:
Taxability of receipts from sale of software products as royalty under Explanation-2 to Section 9(i)(vi) of the IT Act.

Detailed Analysis:

Issue 1: Taxability of Receipts from Sale of Software Products as Royalty
The appeals were filed against the order of DRP-1, Mumbai for A.Y. 2013-14 regarding the taxability of receipts from the sale of software products as royalty under Explanation-2 to Section 9(i)(vi) of the IT Act. The Ld. AR presented previous Tribunal orders in favor of the assessee, stating that receipts from the sale of software products were not liable to tax as royalty. The department argued citing decisions of the Karnataka High Court in favor of revenue. The Tribunal analyzed various judgments, including the Supreme Court's principle favoring the assessee in case of ambiguity in taxing provisions. It was noted that the Hon'ble Delhi High Court had ruled in favor of the assessee in similar cases. Ultimately, the Tribunal upheld the grievance of the assessee, directing the Assessing Officer to delete the addition made on account of receipts for software sales, as they were not liable to tax in India.

Conclusion:
Considering the previous Tribunal orders and legal principles favoring the assessee in cases of ambiguity, the Tribunal ruled in favor of the assessee, holding that the receipts from the sale of software products were not taxable as royalty. The appeals of the assessee were allowed, and the addition made on account of receipts for software sales was directed to be deleted.