CSG INTERNATIONAL LTD.,LONDON vs. ADIT, NEW DELHI

ITA 1522/DEL/2011Status: DisposedITAT Delhi07 May 2024AY 2005-06Bench: SHRI CHALLA NAGENDRA PRASAD (Judicial Member), SHRI PRADIP KUMAR KEDIA (Accountant Member)33 pages
AI SummaryAllowed

What did the Tribunal hold?

The Income Tax Appellate Tribunal (ITAT) referred to its previous decision for AY 2003-04 and the Hon'ble Supreme Court's judgment in Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT. The Tribunal held that payments for software licenses and maintenance services, which merely grant a non-exclusive, non-transferable right to use a copyrighted product, do not constitute 'royalty' under Section 9(1)(vi) of the Act or Article 13 of the DTAA. It emphasized that DTAA definitions for royalty remain unaffected by retrospective amendments to the Income Tax Act.

What were the facts?

CSG International Ltd., a UK company, provided software licenses and maintenance services to Indian customers (Bharti, Ericsson, Motorola). For AY 2005-06, the Assessing Officer and CIT(A) treated the payments, including Rs. 365,090,258/-, as 'royalty' taxable under Section 9(1)(vi) of the Income Tax Act, 1961, and Article 13 of the India-UK DTAA. The assessee contended that these payments were for the sale of copyrighted articles, not copyright, and thus constituted business profits, not royalty, arguing that the transaction involved a limited, non-exclusive right to use the software.

What were the issues?

Whether payments for software licenses and maintenance services are taxable as 'royalty' under the Income Tax Act, 1961, and the India-UK DTAA. Whether the Supreme Court's judgment in Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT applies to the facts of the present case.

Which sections of the Income-tax Act were involved?

Income Tax Act, 1961: Section 9(1)(vi), Income Tax Act, 1961: Section 9(1)(vii), Income Tax Act, 1961: Section 195, Income Tax Act, 1961: Section 197, Income Tax Act, 1961: Section 208, Income Tax Act, 1961: Section 209(1)(d), Income Tax Act, 1961: Section 234B, Income Tax Act, 1961: Section 234D, Income Tax Act, 1961: Section 143(3), Finance Act 2012 (Explanation 4 to Section 9(1)(vi)), Double Taxation Avoidance Agreement (DTAA) between India and United Kingdom: Article 13, Indian Copyright Act, 1957: Section 14(a), Indian Copyright Act, 1957: Section 14(b), Indian Copyright Act, 1957: Section 30

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “D”NEW DELHI

Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRADIP KUMAR KEDIA

For Appellant: Shri Salil Kapoor, Adv, Ms. Ananya Kapoor, Adv
Hearing: 09.02.2024

PER C.N. PRASAD, J.M.

This appeal is filed by the Assessee against the order of the Ld.CIT(Appeals)-11, New Delhi dated 18.01.2011 for the AY 2005-06. The assessee raised the following grounds: -

“1. That the Learned Commissioner of Income-tax (Appeals) [‘Ld. CIT(A)’] has grossly erred, both on facts and in law in upholding the order of Learned Assessing Officer (‘Ld. AO’) and in taxing the revenue earned by the I.T.A.No.1522/Del/2011

Appellant from supply of software as ‘royalty’ under Article 13 of Do

The order continues below.

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