COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-2 vs. MOL CORPORATION

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ITA - 96 / 2023HC Delhi16 February 20233 pages
For Petitioner: SANJAY KUMAR
AI SummaryDismissed

What did the High Court hold?

The ITAT had previously held that income from software licensing and cloud services subscriptions was not taxable as royalty in India. The High Court noted that the proposed questions of law were covered by a Supreme Court judgment.

What were the facts?

The appellant (revenue) challenged an ITAT order concerning AY 2014-15. The appeal questioned whether income from software licensing and cloud services was taxable as royalty in India.

What were the issues?

Whether income from licensing of software and cloud services constitutes royalty under the Income Tax Act and relevant Double Taxation Avoidance Agreements (DTAA).

Which sections of the Income-tax Act were involved?

Section 9(1)(vi)

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$~27 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 96/2023 COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-2

..... Appellant Through: Mr Sanjay Kumar, Sr. Standing Counsel.

versus

MOL CORPORATION

..... Respondent

Through: Mr Akshay Uppal, Advocate.

CORAM:

HON'BLE MR JUSTICE RAJIV SHAKDHER

HON'BLE MS JUSTICE TARA VITASTA GANJU

O R D E R %

16.02.2023

[Physical Hearing/Hybrid Hearing (as per request)] CM APPL. 7381/2023 1. Allowed, subject to just exceptions. CM APPL. 7380/2023 [Application filed on behalf of the appellant seeking condonation of delay of 4 days in filing the appeal] 2. This is an application filed on behalf of the appellant/revenue for condonation of delay in filling the appeal. 3. According to the appellant/revenue, there is delay of 4 days. 4. Counsel for the respondent/assessee, says that he has no objection if the delay in filing the appeal is condoned. 5. Accordingly, the delay in filling the appeal is condoned. 6. The application is disposed of, in the aforesaid terms. ITA 96/2023

page 1 of 3

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 14:03:03

ITA 96/2023 7. This appeal concerns Assessment Year (AY) 2014-15. 8. The challenge in this appeal is laid to the order of the Income Tax Appellate Tribunal [in short, “Tribunal”] dated 05.07.2022 passed in ITA 7258/Del/2017. 9. The following questions of law are proposed by the appellant/revenue:

“A. Whether the Ld. ITAT erred in holding that licensing of the software products of Microsoft in the territory of India by Microsoft Regional Sales Pte. Ltd. is not taxable in India as Royalty under Section 9(1)(vi) of the Income Tax Act, 1961 read with Article 12 of the Indo-USA DTAA?

B. Whether the Ld. ITAT erred in holding that licensing of computer is copyrighted article and not copyright and accordingly the sale of software is in nature of business income and not taxable as royalty under Section 9(1)(vi) of Income Tax Act, 1961 and absence of PE in India, it is not taxable under Article 7 of India-USA DTAA?

C. Whether the Ld. ITAT erred in holding that the subscription received towards Cloud Services is not taxable as Royalty income under the provisions of Income Tax Act, 1961?”

10.

As would be evident the first two questions of law [i.e., A and B] relate to income earned from licensing/sale of software while the third question [i.e., C] relates to subscription received against cloud services offered by the respondent/assessee. 11. The Tribunal has ruled that neither income earned from licensing of software products nor subscription fee earned for providing cloud services, could be construed as royalty. ITA 96/2023

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This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 14:03:03

12.

Mr Sanjay Kumar, senior standing counsel, who appears on behalf of the appellant/revenue, says that the proposed questions are covered by the judgment of the Supreme Court rendered in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT 432 ITR 471 (SC). 12.1. We are also informed by Mr Kumar that a review petition has been filed which is pending consideration. 13. Accordingly, the appeal is closed as no substantial question of law arises for our consideration, albeit, with the caveat that in case the appellant/revenue were to succeed in the review petition, the parties will abide by the decision rendered therein.

RAJIV SHAKDHER, J

TARA VITASTA GANJU, J

FEBRUARY 16, 2023/ tr

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ITA 96/2023

page 3 of 3

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 14:03:03

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