Case Law Details
M/s. Cast Software Inc. Vs DDIT (ITAT Delhi)
Conclusion:
Payment received by assessee for supply of software products to IBM India Pvt. Limited without giving right to reproduction and commercial exploitation did not fall within the ambit of’ royalty’.
Held:
Assessee claimed that it had entered into an agreement with IBM India Pvt. Limited for supply of software products. Assessee claimed that sale value was not taxable as the receipt of the same amount was not Royalty in nature under Article 12 of India-USA DTAA. It further claimed that assessee has sold software license without giving right of reproduction and commercial exploitation. It was a case of sale. Therefore, in the absence of a P.E, the income emanating from the software license sale was not taxable in India. AO however took a view that receipts of assessee pertaining to licensing of software were taxable as Royalty and under section 9(1)(vi) as well as under Article 12(3) of India-USA DTAA. It was held in case of Black Duck Software Inc. v. Dy. CIT International Taxation (2017) 86 Taxmann.com 62 (Del-Trib) wherein it was concluded that payment received towards sale of software product to IBM India (P) Ltd. for limited use without giving right to reproduction and commercial exploitation could not be taxed as Royalty in terms of article 12 of the Ind-US DTAA and since assessee was not having PE in India there could be no taxability in its hands, therefore, following the same decision matter was remanded back to AO for afresh consideration.
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