Case Law Details
Court: Authority for Advance Rulings
Citation: A.A.R. No. 774 of 2008
Brief : In this Ruling Authority for Advance Rulings decided on tax ability of certain computer software payments. Having regard to the facts of the case, the AAR distinguished between transfer of ‘rights in copyrighted software’ and transfer of a ‘copyrighted software’ and observed that mere transfer of computer software de-hors any copyright associated with it, would not amount to royalty. Accordingly, the payments were held not to be in the nature of royalty nor fees for technical services (FTS) under the India-Netherlands tax treaty (Treaty). In view of the fact that the Applicant does not have a permanent establishment (PE) in India, it will not be taxable in India.
Facts and background- The Applicant, incorporated in the Netherlands, is engaged in the business of supplying special purpose computer software to be used in the exploration and production of mineral oils. The software is off-the-shelf, i.e., it is not prepared to suit any special requirements of the customer. The Applicant was awarded a contract to supply certain computer software to an Indian customer (Customer).
As per the agreement between the Applicant and the Customer (Agreement), an exclusive, non- transferable license is granted to the Customer. The transfer of title of the computer software takes place at the Applicant’s location (i.e., the Netherlands) and the consideration is also received outside India in USD.
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In case of software services provided to netherland client from Indian software company what kind of tax will be applied on billing to the client and what percentage, like we apply services tax @10.3% for an Indian client ?