Case Law Details
Ixia Technologies International Ltd. Vs ACIT (IT) (ITAT Kolkata)
Conclusion: Consideration received by assessee for use of or for granting the right to use a computer software would not amount to royalty as the amount received by assessee towards sale of software was on account of sale of ‘copyrighted article’ and not on transfer of any ‘copyright right’.Hence, the said sale proceeds could not be characterised as ‘Royalty’ as per Article 12 of the India-Ireland DTAA.
Held: Assessee-company was a non-resident foreign company. The principal line of activity of the company was design, development, marketing, sales and support including warranty and maintenance of advanced software-based test systems and integrated suites of testing applications which seek to optimize networks and data centres to accelerate, secure and scale the delivery of applications and services for worldwide customers outside of the United States. AO was of the view that the consideration received by a non-resident entity for the licensing of copyrighted article/software, i.e. consideration for use of or for granting the right to use a computer software amounted to royalty under Article 12(3) of the India-Ireland DTAA. It was held since assessee`s case was covered by beneficial provisions of the India-Ireland DTAA, hence the retrospective amendment made in the provisions of section 9(1)(vi), which provides that royalty would include consideration for transfer of all or any rights in respect of any right property, (including granting of software)etc, will not override the provisions of the India-Ireland DTAA. It was noted that the retrospective amendment made in the Act could not override, the provision of Treaty as laid down in the case of Director of Income vs Nokia Networks OY reported in 358 ITR 259 (Delhi HC) and CIT Vs Siemens Aktiongesellschaft reported in 310 ITR 320. Thus, the amount received by assessee towards sale of software was on account of sale of ‘copyrighted article’ and not on transfer of any ‘copyright right’. The right to use any copyright in the software was never transferred by the company in favor of the Indian customers. Hence, the said sale proceeds could not be characterized as ‘Royalty’ as per Article 12 of the India-Ireland DTAA.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal filed by the assessee, pertaining to assessment year 2013-14, is directed against a fair assessment order passed by the assessing officer under section 143(3) / 153(1) / 144C(13) of the Income Tax Act, 1961 (in short the Act) dated 10.12.2016, which incorporates the direction given by the Hon`ble Dispute Resolution Panel u/s 144C(5) of the Act, 1961, dated 28.11.2016.
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