What did the Tribunal hold?

The Tribunal dismissed the revenue's appeal. The dismissal was based on the tax effect of the disputed addition being less than Rs. 50 lacs, as per CBDT Circulars.

The revenue appealed against the CIT(A)'s order deleting an addition of Rs. 3,14,81,419/- from the sale of software products. The CIT(A) held that the revenue from software supply was not taxable in India as royalty under the India-Australia DTAA.

What were the issues?

Whether the revenue from software sales is taxable as royalty in India under the DTAA. Whether the appeal is maintainable based on the tax effect.

DCIT vs Gemcom Software Australia Pty… | ITAT Delhi 2022

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

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

Hearing: 14/02/2022Pronounced: 14/02/2022

This appeal filed by the revenue is preferred against the order of the CIT(A)-42, New Delhi dated 16.08.2018 for A.Y. 2015-16.

The solitary grievance of the revenue is that the CIT(A) erred in deleting the addition of Rs.31481419/- from sale of software products in India and in holding that the revenue received by the assessee from supply of software is not taxable in India as Royalty as provided in the Article 12 form the Indian-Australia DTAA.

The counsel furnished the following calculation of tax effect :-

Amount post giving effect to rectification Amount as per application (attached as S. No. Particulars Assessment order Annexure 1)

Returned Income 9,63,224 9,63,224 1. 2,40,92,950 2,40,92,950 2 Disputed addition on account of sale of software products related to royalty 3. Assessed Income under normal provision (‘A’) 2,50,56,174 2,50,56,174 4. 9,63,224 9,63,224 Total Income chargeable had the total income under normal provision is reduced by disputed addition (‘B’) 5. Income for tax effect (A-B) 2,40,92,950 2,40,92,950 6. Income tax (20% as per assessment order) 48,18,590 36,13,943 . (15% as per rectification application applying DTAA rate) (T) - - 7 Add: Surcharge (‘ii’) Add: Education cess (2% of i + ii) (‘iii’) 96,372 8. 9. 48,186 Add: Secondary and higher education cess (1% of I +ii) (V) Total tax effect (i+ii+iii+iv) 49,63,148 36,13,943 10.

A perusal of the above show that the tax effect as per assessment order and as per order giving effect rectification application is less than Rs.50 lacs, therefore, this appeal filed by the revenue is dismissed as per Circular No.3/2018 read with Circular No.17/2019.

In the result, the appeal filed by the revenue is accordingly dismissed.

The order is pronounced in the open court on 14.02.2022 in the presence of both the rival representatives.

DCIT, INTERNATIONALTAXATION,CIRCLE-1(3)(1), NEW DELHI vs. GEMCOM SOFTWARE AUSTRALIA PTY LTD, PERTH

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