MICRO FOCUS LTD,UNITED KINGDOM vs. DCIT CIRCLE- 2(2)(1), INTERNATIONAL TAXATION, NEW DELHI

PDF · subscribers
ITA 6604/DEL/2019Status: DisposedITAT Delhi20 May 2022AY 2015-162 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the income from the sale of software to Indian customers is not taxable as royalty. This decision aligns with previous rulings by the Tribunal and the Supreme Court for the assessee.

What were the facts?

The assessee, a UK-based company, sells software products in India. The core issue was whether the income from these sales should be taxed as royalty or business income, given the absence of a Permanent Establishment (PE) in India.

What were the issues?

The primary issue was the characterization of income from software sales as royalty or business income under the India-UK Double Taxation Avoidance Agreement (DTAA) in the absence of a PE in India.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI

Before: Dr. B. R. R. KumarSh. Yogesh Kumar US

For Appellant: Ms. Sumisha Murgai, AR
For Respondent: Ms. Anupama Anand, CIT DR
Hearing: 19.05.2022Pronounced: 20.05.2022

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of the ld. CIT(A)-43, New Delhi dated 03.05.2019.

2.

Brief facts of the case are that the assessee is a company incorporated in United Kingdom and engaged in the business of development and distribution of software products and it sells its software products in India either through distributors or directly to the customers. According to the assessee, they have no offices/project offices/godowns or any other business or presence in India and sale software products is conducted outside India, on principal to principal basis, with Indian purchasers.

2 Micro Focus Ltd. 3. The moot ground relates to taxation of the amount received from sale of software to Indian customers as royalty instead of business income in the absence of PE. The Co- ordinate Bench of Tribunal in the case of the assessee for A.Y. 2008-09 to A.Y. 2011-12 and A.Y. 2013-14 to A.Y. 2014-15 held that the income of the assessee is not liable to tax under the head “royalty”.

4.

The Hon’ble Supreme Court while dealing the question “whether on facts and circumstances of the case and in law, the ITAT erred in holding that receipts of the assessee from sale of software is not taxable as royalty under the India-UK DTAA?” affirmed the order of the Tribunal. Since, the matter has attained finality by the order of the Hon’ble Apex Court, the appeal of the assessee is hereby allowed.

Order Pronounced in the Open Court on 20/05/2022.

More judgments on Section 9(1)(vi)

All 1,705 judgments and leading authorities on Section 9(1)(vi) →

Recent GST High Court judgments

Search GST case law →