SIEMENS INDUSTRY SOFTWARE (SUCCESSOR IN INTEREST TO ALTAIR ENGINEERING INC),UNITED STATES OF AMERICA vs. THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAX, CIRCLE 1(1), BANGALORE

ITITA 1061/BANG/2026Status: DisposedITAT Bangalore08 September 2026AY 2023-245 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the issue is squarely covered by the decision of the Coordinate Bench in the assessee's own case for AY 2022-23. In that decision, the Tribunal considered an identical issue regarding the taxability of software supply consideration and decided in favour of the assessee. The Tribunal noted that the receipts from the sale of standard software were neither royalty under the Income Tax Act nor under the DTAA and were therefore not chargeable to tax in India. The Tribunal also directed the deletion of additions made on account of cross-charges for third-party hardware. For the current assessment year, the revenue did not present any new material showing a change in facts, terms of agreements, or the applicable legal position. Consequently, following the precedent, the Tribunal held that the consideration received from Indian end-users for software supply cannot be treated as royalty. It is in the nature of business income and, in the absence of a PE in India, is not taxable under Article 7 of the India-USA DTAA. The addition made by the AO was deleted, and the ground raised by the assessee was allowed.

What were the facts?

The assessee, Siemens Industry Software (successor in interest to Altair Engineering Inc.), a US tax resident, is engaged in developing and distributing software. For Assessment Year 2023-24, the Assessing Officer (AO) treated Rs. 133,63,25,760 received from the sale/licensing of standard software and cloud-based offerings as royalty or fees for technical services, taxable in India. The AO's reasoning was that the software was customizable and agreements granted modification rights. The assessee objected, arguing the receipts were from direct sales of standard off-the-shelf software and sales to its Indian subsidiary, not royalty. The Dispute Resolution Panel (DRP) upheld the AO's treatment, following its own directions for AY 2022-23.

What were the issues?

1. Whether the consideration received by the assessee from the supply of standard software to customers in India is taxable in India as royalty under the Income Tax Act, 1961, and the India-USA Double Taxation Avoidance Agreement (DTAA). Assessee's Contention: The receipts are from the direct sale of standard off-the-shelf software, and no rights in the copyright are transferred. Therefore, they cannot be treated as royalty. In the absence of a Permanent Establishment (PE) in India, the income is not taxable in India. The assessee relied on the Coordinate Bench decision in its own case for AY 2022-23 (IT(TP)A No. 215/Bang/2025). Revenue's Contention: The AO examined the nature of the software and customer rights and correctly treated the receipts as royalty. The DRP followed its directions for the preceding year, and there was no change in facts. The revenue supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144C(5),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal has been instituted by the Assessee against the assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) of the Act, in pursuant to the directions of the Learned Dispute Reso

The order continues below.

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