Case Law Details
CIT – International Taxation Vs DXC Technology Services Singapore Pte. Ltd. (Delhi High Court)
Introduction: The Delhi High Court recently ruled on an appeal filed by CIT – International Taxation-1 against DXC Technology Services Singapore Pte. Ltd. The appeal concerned the Assessment Year 2009-10 and focused on whether payments received for the sale/supply of software could be considered royalty under Article 12(3) of the India-Singapore Double Taxation Avoidance Agreement (DTAA).
Detailed Analysis: The dispute originated from the scrutiny-assessment of the respondent/assessee, leading to the inclusion of consideration received for the off-the-shelf sale of software in the taxable amount. The Assessing Officer (AO) treated this amount as royalty, resulting in an addition of Rs. 1,14,09,24,658/- to the taxable income.
However, the Tribunal, in its order dated 31.03.2022, disagreed with the AO’s interpretation. The Tribunal’s key finding was that the respondent/assessee had not transferred the copyright associated with the software, a crucial aspect in determining royalty. Citing the Supreme Court’s judgment in Engineering Analysis Centre of Excellence Pvt. Ltd. v CIT (432 ITR 471), the Tribunal concluded that the amount could not be considered royalty under Article 12(3) of the India-Singapore DTAA.
The Delhi High Court, in its assessment of the case, concurred with the Tribunal’s decision. Emphasizing the importance of the Supreme Court’s precedent and considering the factual findings, the court held that the impugned order did not warrant interference. The ruling affirms that payments received for the sale/supply of software in this context do not qualify as royalty under the applicable tax treaty.
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