DCIT (INTERNATIONAL TAXATION), NEW DELHI vs. M/S XIOCOM (NW) LTD., NEW DELHI

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ITA 2560/DEL/2016Status: DisposedITAT Delhi17 February 2022AY 2010-117 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal, following the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited, held that the income from the license of 'off the shelf' software is not taxable as royalty. Therefore, the CIT(A)'s decision to delete the addition was upheld.

What were the facts?

The assessee company granted license rights for its 'off the shelf' software to an Indian company. The Assessing Officer (AO) treated the income from this license as royalty taxable under Section 9(1)(vi) of the Income Tax Act and the Indo-NZ DTAA.

What were the issues?

Whether the income received from granting license rights for 'off the shelf' software is to be treated as royalty under the Income Tax Act and the relevant DTAA.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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

Before: SH. N. K. BILLAIYA & MS. ASTHA CHANDRA

Hearing: 17/02/2022Pronounced: 17/02/2022

This appeal filed by the Revenue is preferred against the order of the CIT(A)-43, New Delhi dated 12.02.2016 pertaining to A.Y. 2010-11.

2.

The grievance of the revenue read as under :-

3.

None attended on behalf of the assessee inspite of notice, we decided to proceed exparte.

4.

The DR was heard at length. Case record carefully perused.

5.

Ground No.2 as mentioned above is in itself sufficient to dismiss this appeal but for the sake of completeness we will consider the facts in brief.

6.

The assessee company is involved in designing and providing fully tailored off the shelf wireless broadband solutions throughout the USA and a few other countries in Africa. During the year under consideration the assessee company sold “off the shelf” software through a non-exclusive license rights to the Zylog systems (India) Ltd. to utilize the technology in certain areas in India.

7.

During the course of the scrutiny assessment proceedings the assessee was asked to show cause as to why receipt from granting of license should not be treated as Royalty. The assessee filed a detailed submission explaining the nature of the transaction. The detailed submissions of the assessee have been extracted by the AO at para-3 of his order and after extracting the detailed submissions the AO formed a belief that the income of Rs.192480000/- from license IMS software to Zylog Systems (India) Ltd. is taxable u/s. 9 (1) (vi) of the Act and under Article 12 of Indo-NZ DTAA.

8.

Assessee strongly agitated the matter before the CIT(A) and placed strong reliance on the decision of the Hon’ble Jurisdictional High Court of Delhi in the case of Infrasoft Limited in ITA No.1034/2009.

9.

After considering the facts and the submissions and after perusing the binding decision of the Hon’ble Jurisdictional High Court of Delhi the CIT(A) held as under :-

10.

Before us the DR placed strong reliance on the assessment order but could not bring any distinguishing decision in favour of the revenue.

11.

We find that impugned quarrel has now been well settled by the judgment of the Hon’ble Supreme court in the case of Engineering Analysis Centre of Excellence Private Limited 432 ITR 471 wherein the Hon’ble Supreme Court has also considered the Judgment of Hon’ble Delhi High Court. The relevant finding of the Hon’ble Supreme Court read as under :-

12.

Respectfully following the decision of the Hon’ble Supreme Court (supra) we decline to interfere with the findings of the CIT(A).

13.

Ground No.1,2 and 3 are allowed and ground No.4 becomes infructuous. 14. In the result, the appeal filed by the Revenue is dismissed. 15. Decision announced in the open court in the presence of both representatives on 17.02.2022.

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