Case Law Details
Digite Inc. USA Vs ADIT (ITAT Delhi)
ITAT Delhi held that payment received from sale of software products/licenses doesn’t fall in the nature of royalty as per Article 12(3) and as per section 9(1)(vi) and hence the same is not taxable in India.
Facts- The case of the assessee was selected for scrutiny and accordingly notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. AO noticed that the perusal of AIR as per ITD system revealed that an amount of Rs. 1,49,48,277/- was received by the assessee which the assessee had claimed to be non taxable. Assessee was asked to show-cause as to why the aforesaid receipts which was from license fees by granting provision of copyrighted software licenses be not taxed as Royalty under the provisions of Income Tax Act, 1961 and India – USA Double Taxation Avoidance Agreement.
The submissions of the assessee was not found acceptable to AO. AO thereafter in the draft assessment order passed u/s 144C(1)/ 143(3) order dated 07.12.2016 held the amount of Rs. 1,49,48,277/- to be taxable as Royalty under Income Tax Act as well as under India – USA DTAA. He accordingly held it to be taxable at 15%, being the rate of tax for royalties as per the DTAAA.
Aggrieved by the draft order of AO, assessee carried the matter before DRP who vide order dated 28.09.20 17 in the order passed u/s 144C(5) of the Act upheld the draft assessment order. Thereafter, assessment order was framed u/s 144C(13)/ 143(3) of the Act dated 11.10.2017 wherein the AO determined the total income at Rs. 1,49,48,277/-. Aggrieved by the order of AO passed pursuant the DRP directions, assessee has preferred the present appeal.
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