CIT Vs Informatica LLC (Karnataka High Court)
Karnataka HC Reaffirms Engineering Analysis: Ancillary Software Services Not Taxable as FTS or Royalty
The Karnataka High Court dismissed the Revenue’s appeal and reaffirmed that receipts from ancillary services connected with software licensing cannot be taxed as Fees for Technical Services (FTS) or royalty merely because they accompany the software transaction. The Revenue had contended that the Tribunal erred in treating the ancillary services as part of software services by relying on the Supreme Court’s decision in Engineering Analysis Centre for Excellence Pvt. Ltd. without independently examining the nature of the agreements or the applicability of Article 12(4) of the India–USA DTAA governing FTS. However, the Court noted that an identical issue in the assessee’s own case for AY 2015-16 had already been decided in favour of the assessee by following the Supreme Court’s ruling in Engineering Analysis. It further observed that the review petition against the Supreme Court’s judgment had also been dismissed, thereby reinforcing the binding nature of that decision. Holding that the controversy was squarely covered by the earlier precedent and that no fresh or substantial question of law survived for consideration, the High Court dismissed the Revenue’s appeal.
Cases Discussed:
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
