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TMI Blog2013 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... would constitute business receipts in the hands of the assesse – the assessee who is a non-resident does not have a permanent establishment and therefore business income of the assessee cannot be taxed in India in the absence of a permanent establishment - the amount received by the assessee towards supply of software cannot be segregated from the supply of equipment and hence that portion cannot be considered as 'royalty' – Decided against Revenue. - ITA no. 4502/Mum./2009 - - - Dated:- 18-5-2012 - Order The order of the Bench was delivered by J. Sudhakar Reddy (Accountant Member).-The present appeal preferred by the Revenue, is directed against the impugned order dated May 14, 2009, passed by the Commissioner (Appeals)-XXXI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the value of the software supplied by the assessee to M/s. Siemens Ltd. cannot be treated as 'royalty' in the hands of the assessee. The assessee is engaged in the business of sale of equipment. The software in question is embedded in the hardware supplied by it. The software cannot function independent of the corresponding hardware. It is also not disputed that the equipment along with the embedded software was sold at a place which is outside India. This is evident from the fact that no part of the sale consideration for the sale of hardware has been brought to tax in India. Consequently, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 494 (Karn), I. T. A. No. 2808 of 2005, has decided the issue in favour of the Revenue. He submitted that there are certain other decisions which are in favour of the Revenue. He also relied on the proposed amendment to the Income-tax Act, 1961, in 2012 Budget and submitted that the issue has to be adjudicated in favour of the Revenue. After conclusion of the hearing on April 18, 2012, the learned Departmental representative, filed a letter on April 27, 2012, which is received by us on April 30, 2012, and wanted the case to be adjourned till the passage of the Finance Bill by Parliament. Alternatively, he prayed that two more weeks be granted in filing the written submissions. As the hearing was already concluded on April 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Special Bench in the afore noted case. The learned Departmental representative could not point out any distinguishing feature in the facts of the instant case vis-a-vis that decided by the Special Bench. Respectfully following the view taken by the Special Bench on this aspect of the matter, we are of the considered opinion that the amount received by the assessee towards supply of software cannot be segregated from the supply of equipment and hence that portion cannot be considered as 'royalty'. We, therefore, approve the view taken by the learned Commissioner of Income-tax (Appeals) on this issue. The hon'ble Delhi High Court in Director of Income-tax v. Ericsson A. B. I. T. A. No. 504 of 2007, reported as [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Director of Income-tax v. Ericsson A. B. [2012] 343 ITR 470 (Delhi). It can therefore be said that the hon'ble Delhi High Court has held that consideration paid merely for right to use cannot be held to be royalty. This ratio laid down by the hon'ble Delhi High Court would also apply when shrink wrap software is sold. 14. Following the view expressed by the hon'ble Delhi High Court in the case of Director of Income-tax v. Ericsson A. B. [2012] 343 ITR 470 (Delhi), which is favourable to the assessee, we hold that the consideration received by the assessee for software was not royalty. The receipts would constitute business receipts in the hands of the assessee. Admittedly, the assessee who is a non-resident does not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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