COMPTEL OYJ,FINLAND vs. DCIT CIRCLE-1(2)(1) INTERNATIONAL TAXATION, NEW DELHI

The issue in dispute in ground nos. 2 to 4 is, whether amount received by the assessee from sale of software can be treated as royalty.

Briefly, the facts are, assessee, a non-resident corporate entity, is a tax-resident of Finland and is eligible to avail benefit under the provisions of India-Finland Double Taxation Avoidance Agreement (DTAA). As could be seen from the facts on record, assessee develops, manufactures and delivers off-the-shelf mediation, charging and fulfillment of solution and software. These are sold to the telephone operators who provide telecommunication services. Before the departmental authorities, the assessee pleaded that the amount received by the assessee from sale of software is not in the nature of royalty as the assessee sells copy righted articles and not the copy right itself. The aforesaid submission of the assessee did not find favour with the departmental authorities. Both, the Assessing Officer as well as learned DRP relying upon the decision taken by them on the issue in assessee’s own case in preceding assessment years, held that the amount received by assessee, is in the nature of royalty under Article 12(3) of Tax-Treaty.

Before us, learned counsel appearing for the assessee submitted that the issue has been decided in favour of the assessee consistently not only by the Tribunal but by the Hon’ble Jurisdictional High Court in assessment years 2007-08 to 2014-15. Further, he submitted, the decision of the Tribunal and the Hon'ble High Court has been upheld by the Hon'ble Supreme Court while deciding Special Leave Petition filed by the Revenue. In this context, he drew our attention to the decision of the Tribunal, Hon'ble High Court and Hon'ble Supreme Court.

Learned Departmental Representative could not controvert the aforesaid factual position.

Having considered rival submissions, we find, whether receipts from software sold by the assessee is in the nature of royalty, is a recurring dispute between the assessee and Revenue right from the assessment year 2007-08. It is evident, the Tribunal has decided the issue in favour of assessee in its own case in assessment years 2007- 08 to 2015-16. In fact, the decision of the Tribunal in assessment years 2007-08 to 2014-15 have not only been upheld by the Hon’ble Jurisdictional High Court, but, the Special Leave Petitions filed by Revenue against the decision of the Hon'ble High Court have been dismissed by the Hon'ble Supreme Court while deciding a batch of appeals on identical issues in judgment dated 02.03.2021 delivered in case of Engineering Analysis Centre of Accessories Pvt. Ltd. Vs. CIT & Ors. Thus, it is a fact on record that the issue in dispute stands settled in favour of assessee by virtue of the decision of Hon'ble Supreme Court in assessee’s own case in the preceding assessment years. That being the factual position emerging from record, we have no hesitation in deleting the addition made on account of royalty.

As regards ground nos. 5 & 6, we direct the Assessing Officer to verify the facts on record and decide the issue relating to interest charged under Sections 234B and 244A of the Income-Tax Act, 1961, after due opportunity of being heard to the assessee.

In the result, the appeal is partly allowed.