Case Law Details
ACIT Vs Newspage Pvt. Ltd. (ITAT Delhi)
In a significant ruling dated December 8, 2023, the Income Tax Appellate Tribunal (ITAT) Delhi bench clarified the taxability of receipts from the sale of software licenses in the case of ACIT Vs Newspage Pvt. Ltd. This case revolved around whether the income received by Newspage Pvt. Ltd. from Pepsico India Holdings Ltd. and ITC Limited for the sale of software licenses and associated services constituted royalty under Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement (DTAA).
Detailed Analysis: The Revenue challenged the decision of the Commissioner of Income Tax (Appeals) – 43, Delhi, which held that the consideration received from the sale of software licenses and the provision of support and maintenance services, as well as customization services, did not qualify as royalty or Fees for Technical Services (FTS) within the meaning of Article 12(3) of the India-Singapore DTAA.
The primary contention of the Revenue was whether the CIT(A)’s ruling aligns with the provisions of the DTAA and the Income Tax Act. The ITAT meticulously analyzed the agreements between Newspage Pvt. Ltd. and its clients, focusing on the nature of the transactions and the specific services provided. The tribunal found that the transactions were correctly classified by the CIT(A), relying heavily on the precedent set by the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT, which clarified the taxability of software transactions under DTAAs.
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