ALTAIR ENGINEERING INC.,,UNITED STATES vs. DCIT, INTERNATIONAL TAXATION, CIRCLE-1(1), BENGALURU

ITITA 215/BANG/2025Status: DisposedITAT Bangalore27 May 2025AY 2022-2313 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, M/s. Altair Engineering Inc., filed an appeal for assessment year 2022-23 against an assessment order passed by the Deputy Commissioner of Income Tax (DCIT), International Taxation, Bengaluru. The DCIT determined the total income at Rs.98,82,49,606/- against a returned income of Rs.62,15,075/-. This order was passed pursuant to directions from the Dispute Resolution Panel (DRP). The assessee is aggrieved by additions made to its income, primarily concerning receipts from software sales and cross-charges for third-party software. The assessee contends that these amounts are not 'royalty' as per the Income Tax Act, 1961, or the India-USA Double Taxation Avoidance Agreement (DTAA). The revenue authorities treated these receipts as royalty, despite acknowledging that the issue was covered by Supreme Court decisions in favour of the assessee.

What did the Tribunal hold?

The Tribunal held that the receipts totaling Rs.97.18 crores, comprising Rs.92.55 crores from the sale of standard software and Rs.4.62 crores as cross-charge for third-party software, are neither royalty under the Income Tax Act nor under the DTAA. The Tribunal noted that the revenue authorities themselves accepted that the issue was covered in favour of the assessee by the Supreme Court decision in Engineering Analysis Centre of Excellence Private Ltd.'s case and by the Tribunal's own decisions in the assessee's own cases for earlier years. Therefore, these amounts are not chargeable to tax in India. The Tribunal directed the deletion of the addition of Rs.97.18 crores. Regarding the Rs.1,02,17,458/-, the Tribunal found that this sum received from Altair Engineering (India) Pvt. Ltd. was a reimbursement for third-party hardware purchased by the assessee on behalf of the Indian entity. Consequently, the Tribunal found no reason to uphold the Assessing Officer's action of taxing this sum as capital gains under the Income-tax Act or the DTAA and directed its deletion. Other technical grounds were left undecided as the substantive issues were decided in favour of the assessee.

What were the issues?

1. Whether the receipts totaling Rs.97,18,17,073/-, comprising Rs.92,55,77,068/- from direct sales of standard software and Rs.4,62,40,005/- from sale of software to Altair India for onward distribution, are in the nature of 'royalty' under Section 9(1)(vi) of the Income Tax Act, 1961, read with Explanations 2 and 4, and Article 12(3) of the Indo-USA DTAA. The assessee argued that these receipts are not royalty, citing the Supreme Court decision in Engineering Analysis Centre of Excellence Private Ltd. vs. CIT & Another and its own prior appeals. The revenue authorities, while acknowledging the Supreme Court's decision, directed the addition to keep the issue alive pending a review petition. 2. Whether the addition of Rs.1,02,17,458/-, representing costs of third-party software purchased by the assessee on behalf of Altair India and cross-charged, is taxable as capital gains under the Income Tax Act or Article 13 of the DTAA. The assessee contended this is a reimbursement without mark-up, and the DRP had directed verification and deletion if it was reimbursement. The revenue authorities taxed it as capital gains.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144C(1),Section 144C(5),Section 153(1),Section 144C(8),Section 9(1)(vi),Section 90(2),Section 14(a),Section 14(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.

For Appellant: Shri Tata Krishna, Advocate
For Respondent: Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru
Hearing: 15.04.2025Pronounced: 27.05.2025

Per Prashant Maharishi, Vice President

1.

This appeal is filed by M/s. Altair Engineering Inc. (the assessee/appellant) for the assessment year 2022-23 against the assessment order passed u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] dated 30.12.2024 by the DCIT, International Taxation Circle 1(1), Bengaluru [ld. AO] wherein the total income of the assessee is determined at Rs.98,82,49,606/- against the returned income of the assessee at Rs.62,15,075/-. This assessment order is passed in pursuance of the directions issued u/s. 144C(5) of the Act by

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 144C(13)

All 3,299 judgments and leading authorities on Section 144C(13) →

Recent GST High Court judgments

Search GST case law →