JEPPESEN GMBH,GERMANY vs. ACIT, INTERNATION TAXATION, CIRCLE-3(1)(1), MUMBAI, MUMBAI, MAHARASHTRA

ITA 1337/MUM/2025Status: DisposedITAT Mumbai29 December 2025AY 2022-2320 pages
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What did the Tribunal hold?

The Tribunal held that the receipts earned by the assessee from Indian customers cannot be treated as royalty under Article 12 of the India-Germany DTAA. The Tribunal reasoned that the provision of flight information/data and software licenses, along with ancillary services like training and support, did not involve the transfer or imparting of industrial, commercial, or scientific experience in a manner that would enable the customer to independently reproduce or apply such experience. The Tribunal distinguished between a know-how contract and a service contract, emphasizing that where the provider continues to use their expertise to perform a task for the recipient, the payment is for services and not royalty. The Tribunal also noted that the restrictions on the software, such as prohibiting disassembly or reverse engineering, indicated a limited right of use rather than a transfer of underlying technology. Regarding the sale of printed charts, the Tribunal held that a sale of tangible goods cannot be transmuted into royalty for 'experience' merely because expertise was involved in their production. Since the revenue did not contend that the assessee had a Permanent Establishment in India, the receipts, being in the nature of business income, are not chargeable to tax in India. Consequently, the addition made by the AO and sustained by the DRP was directed to be deleted. The issue regarding the refund/credit of equalization levy was rendered academic due to the deletion of the addition.

What were the facts?

The assessee, Jeppesen GmbH, a German company, provides flight and navigational informational solutions, including software, to air operators. For assessment year 2022-23, it earned INR 47,60,85,618 from Indian customers. The Assessing Officer (AO) and Dispute Resolution Panel (DRP) treated this income as royalty under Article 12 of the India-Germany Double Taxation Avoidance Agreement (DTAA) and Section 9(1)(vi) of the Income-tax Act, 1961, citing the use of industrial, commercial, or scientific experience. The assessee contended that the income was business income not taxable in India due to the absence of a Permanent Establishment (PE). A portion of the receipts was for printed charts, which the assessee argued constituted a sale of goods.

What were the issues?

1. Whether the consideration of INR 47,60,85,618 earned by the assessee from Indian customers is royalty as per Article 12 of the India-Germany DTAA, by holding that such consideration is received for the use of or the right to use industrial, commercial, or scientific experience (Section 9(1)(vi) and Article 12 of India-Germany DTAA)? - Assessee's contention: The receipts qualify as business income and are not taxable in India due to the absence of a Permanent Establishment (PE). The income is for providing navigational data and software licenses, not for imparting industrial, commercial, or scientific experience. - Revenue's contention: The receipts fall within the ambit of royalty as per Article 12 of the India-Germany DTAA and Section 9(1)(vi) of the Act, as the assessee's activities involve compiling data based on its accumulated experience and providing it to customers. 2. Whether the consideration of INR 5,16,00,963 received towards printed charts constitutes a sale of goods and cannot be taxed as royalty in the hands of the Appellant (Article 12 of India-Germany DTAA)? - Assessee's contention: The receipts for printed charts are a sale of goods and not royalty. - Revenue's contention: Such physical goods are in the nature of data and charts, and the medium of delivery does not change the character of the income, thus it amounts to royalty. 3. Whether the equalization levy amounting to INR 85,88,397 paid in respect of receipts amounting to INR 42,44,84,655 should be refunded or the Appellant be entitled to claim corresponding credit (Section 10(50) and Equalisation Levy provisions)? - Assessee's contention: The equalization levy paid should be refunded or credit should be given. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 9(1)(vi),Section 10(50)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘I’ BENCH MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Appellant: Shri Hirali Desai / Ms. Nidhi, Shri Hardik
For Respondent: Shri Krishna Kumar, Sr. DR
Hearing: 18/11/2025Pronounced: 29/12/2025

PER AMIT SHUKLA (J.M):

This appeal has been preferred by the assessee against the final assessment order dated 24/12/2024 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961, in pursuance of the directions of the learned Dispute Resolution Panel dated 10/12/2024, for the assessment year 2022-23. 2. The effective grounds which have been argued before us read as under:

“2. On the facts and circumstances of the case & in law, the Ld. AO/DRP grossly erred in concluding that consideration earned by the Appellant of INR 47,60,85,618 from the Indian Customers is Royalty as per Article 12 of Double Tax Avoidance Agreement between India and Germa

The order continues below.

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