MCAFEE SINGAPORE PTE LTD.,SINGAPORE vs. DEPUTY COMMISSIONER OF INCOME-TAX, INT TAX CIRCLE (3)(2)1, MUMBAI

ITITA 1174/MUM/2026Status: DisposedITAT Mumbai05 June 2026AY 2018-199 pages
AI SummaryRemanded

What were the facts?

The assessee, McAfee Singapore Pte. Ltd., a Singaporean tax resident, sells security software licenses to Indian distributors. For Assessment Year 2018-19, the assessee offered receipts of Rs.134,40,95,509/- as royalty under Section 9(1)(vi) of the Income Tax Act and Article 12(3) of the India-Singapore DTAA, claiming TDS credit of Rs.15,31,81,629/-. The return was processed under Section 143(1) without adjustment. The assessee appealed to the CIT(A) challenging the taxability of these receipts as royalty, citing the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. The CIT(A) dismissed the appeal in limine, holding that an appeal against a Section 143(1) intimation is maintainable only if an adjustment is challenged, and since no adjustment was made, the appeal was not maintainable.

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to raise the claim of non-taxability of receipts as royalty income before the first appellate authority. The Tribunal reasoned that tax can only be collected by authority of law (Article 265 of the Constitution of India), and if a receipt is not in the nature of income, it cannot be taxed, even if mistakenly offered as income due to lack of clarity or ignorance of law. The Tribunal cited decisions like Goetze (India) Ltd. and CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. to support the principle that a fresh claim can be raised before appellate authorities, even against a Section 143(1) intimation without adjustment. On merits, the Tribunal noted that the assessee granted limited resale rights without copyright transfer and that similar receipts in subsequent years were accepted as non-royalty. However, since the issue was not factually examined at any stage, the Tribunal restored the issue to the Assessing Officer to examine whether the software products were copyrighted articles without transfer of copyright. If found to be so, the receipts would not be treated as royalty and no addition would be made. The Assessing Officer was directed to provide a reasonable opportunity of being heard to the assessee. The issue of taxability of receipts as royalty was expressly left undecided pending factual examination by the AO.

What were the issues?

1. Whether the assessee is entitled to raise a fresh claim before the first appellate authority regarding the non-taxability of receipts offered as royalty income, despite the return being processed under Section 143(1) without adjustment. Assessee's Contention: The assessee argued that at the time of filing the return, there was ambiguity regarding the taxability of software license sales as royalty. Following the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd., which clarified that off-the-shelf software sales without copyright transfer are not royalty, the assessee realized its mistake. They contended that tax cannot be imposed without authority of law and that an item not in the nature of income cannot be taxed, entitling them to raise the issue at the appellate stage. They relied on Balmukund Acharya, Captain Stell India Ltd., and Pr. CIT vs. Karnataka State Co-operative Federation Ltd. Revenue's Contention: The revenue argued that it was not factually verified whether the software products sold were copyrighted articles simpliciter or if the copyright itself was transferred, necessitating examination by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 9(1)(vi),Section 143(1),Section 143(1)(a),Section 246A(1)(a),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR

For Appellant: Shri Dhanesh Bafna, Shri Amol Mahajan &, Ms. Tejal Saraf
For Respondent: Shri Satya Pal Kumar-CIT(DR)
Hearing: 08.04.2026Pronounced: 05.06.2026

Per Saktijit Dey, Vice President:

Captioned appeal by the assessee, arises out of order dated 18.11.2025 of learned Commissioner of Income Tax (Appeals), Mumbai (‘ld.CIT(A) for short), pertaining to the assessment year (A.Y.) 2018-19. 2. Ground no. 1 being general in nature, does not require adjudication. In ground nos. 2 to 5, the assessee has challenged the taxability of Rs.134,40,95,509/- as income in the nature of royalty u/s. 9(1)(vi) of the Income Tax Act, 1961 (‘the Act’ for short) and Article 12(3) of India-Singapore Double Taxation Avoidance Agreement (‘DTAA’ for short).

2 IT(IT)A No. 11

The order continues below.

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