IBM Singapore Pte Ltd. Vs DCIT (ITAT Banglore)
As per the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd., sale proceeds received by the assessee on sale of software licenses cannot be categorized as “Royalty” within the meaning of provisions of DTAA.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These cross appeals are directed against the order dated 28.9.2018 passed by Ld. CIT(A)-12, Bangalore and they relate to the assessment year 2014-15.
2. At the time of hearing, the Ld A.R did not press grounds 2.1 to 2.10 relating to assessment of amount received as reimbursement of expenses treating the same as “Fee for technical services”. Accordingly, those grounds are dismissed as not pressed. Ground No.1 is general in nature. Ground Nos.3.2 to 3.15 relate to the assessment of sale proceeds received on sale of software licenses as “Royalty income”.
3. The revenue is contesting the decision of Ld CIT(A) in granting relief in respect of interest charged u/s 234B of the Act.
4. The assessee is a Singapore based company engaged in the business of dealing in software & hardware products. Under the provisions of Indian Income tax Act, the assessee is a non-resident. During the year under consideration, the assessee has sold software licenses to its Associated Enterprise (AE) and also to other Indian customers. The assessee did not offer any income on such sale for taxation in India. The Ld A.R submitted that the AE of the assessee, viz., M/s IBM India Pvt Ltd is the authorized distributor of software licenses sold by the assessee. In respect of sales made to Non-Associated enterprises, the Ld A.R submitted that majority of sales were made to “other distributors” and in few cases, it was sold to End users also. The details of sales effected by the assessee during the year under consideration in India are tabulated as under by the A.O.
