THE COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-1 vs. M/S ESERVGLOBAL SA.

PDF · subscribers

ITA/773/2017HC DelhiDLHC01281923201727 September 2017Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MS. JUSTICE PRATHIBA M. SINGH2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the question of whether payments for software supply constitute royalty is no longer res integra. Citing its own previous decisions in Director of Income Tax v. Infrasoft Ltd. (2014) and Principal Commissioner of Income Tax v. M.Tech India (P) Ltd. (2016), the Court reiterated that such payments for software supply cannot be taxed as royalty. Consequently, no substantial question of law arose from the ITAT's impugned order. The appeal filed by the Revenue was accordingly dismissed. The operative direction was the dismissal of the appeal.

What were the facts?

The Commissioner of Income Tax (International Taxation)-1 (the Revenue) filed an appeal against an order dated January 19, 2017, passed by the Income Tax Appellate Tribunal (ITAT) in ITA No.557/Del/2013 for Assessment Year 2006-07. The appeal challenged the ITAT's deletion of an addition made by the Assessing Officer. This addition pertained to revenue received by the Assessee, Eservglobal SA, from Nortel India Pvt. Ltd. for the supply of software. The Revenue sought to tax this payment as royalty.

What were the issues?

1. Whether the payment received by the Assessee from Nortel India Pvt. Ltd. for the supply of software can be characterized as royalty and brought to tax under the Income Tax Act. (Question of law, concerning the interpretation of 'royalty' in the context of software supply). Assessee's Contention: The judgment does not record any specific arguments made by the Assessee before the High Court. However, the ITAT's deletion of the addition implies the Assessee likely argued that the payment was not royalty. Revenue's Contention: The Revenue urged that the payment for the supply of software should be treated as royalty and taxed accordingly.

AI-generated summary — verify with the full judgment below

$~3 * IN THE HIGH COURT OF DELHI AT NEW DELHI +

ITA 773/2017

THE COMMISSIONER OF INCOME

TAX (INTERNATIONAL TAXATION)-1 ..... Appellant Through: Mr.Sanjay Kumar, Mr.Rahul Chaudhary, Advocates.

Versus

ESERVGLOBAL SA.

..... Respondent Through: Mr.Nageswar Rao, Advocate with Mr.Sandeep S.Karhail, Mr.Purushottam Anand, Advocates.

CORAM: JUSTICE S. MURALIDHAR JUSTICE PRATHIBA M. SINGH

O R D E R %

27.09.2017 C.M.No.32599/2017 (delay in filing) 1. For the reasons explained in the application, the delay in filing the appeal is condoned. The application is disposed of. ITA No.773/2017 2. The Revenue is in appeal against an order dated 19th January, 2017 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA No.557/Del/2013 for the Assessment Year (‘AY’) 2006- 07.

The question urged by the Revenue concerns the deletion by the ITAT of the addition made by the Assessing Officer of the revenue received by the Assessee from Nortel India Pvt. Ltd. for the supply of software.

The question whether the said payment can be termed as payment of

royalty is no longer res integra. In Director of Income Tax v. Infrasoft Ltd. (2014) 264 CTR 329 (Del) and Principal Commissioner of Income Tax v. M.Tech India (P) Ltd. (2016) 381 ITR 31 (Del) this Court has held that the aforementioned payment for supply of software cannot be brought to tax as royalty.

No substantial question of law arises from the impugned order of the ITAT. The appeal is accordingly dismissed.

S.MURALIDHAR, J.

PRATHIBA M. SINGH, J. SEPTEMBER 27, 2017 ‘anb’

Recent GST High Court judgments

Search GST case law →