CIT Vs Mol Corporation (Delhi High Court)
The Delhi High Court has dismissed a series of Income Tax Appeals filed by the Commissioner of Income Tax (CIT) against MOL Corporation, reinforcing the legal position that payments for the use or resale of computer software do not constitute royalty income taxable in India. The common order, delivered on February 14, 2022, by the Income Tax Appellate Tribunal (ITAT) in ITA No.6194/Del/2018, ITA No.6195/Del/2018, ITA No.6196/Del./2018, and ITA No.6197/Del/2018, had been challenged by the revenue.
During the court proceedings, legal counsel representing the Appellant (Revenue) acknowledged that the legal questions central to these appeals had already been conclusively addressed by a landmark judgment of the Supreme Court of India. This precedent was established in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT (Civil Appeal No(s). 8733-8734/2018). Despite this admission, the appeals were pursued by the revenue, reportedly to maintain the issue as live, citing a pending review petition against the Supreme Court’s definitive order.
However, the Delhi High Court concluded that the matter of taxability for software receipts was “no longer res integra” – a Latin legal term signifying that the issue has been definitively decided and is not open to further argument. The court firmly based its decision on the Supreme Court’s comprehensive pronouncement in Engineering Analysis Centre of Excellence Private Limited vs. Commissioner of Income Tax and Anr., specifically cited as (2021) SCCOnLine SC 159.
