PR COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) vs. M/S MICRO FOCUS MARIGALANTE LTD

PR. COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), KORMANGALA, BANGALORE.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1), BANGALORE. …APPELLANTS (BY SRI. E.I. SANMATHI, SR. STANDING COUNSEL AND SRI SUSHAL TIWARI, STANDING COUNSEL)

The Revenue has preferred this appeal, assailing the order dated 12.10.2023 in IT (IT)A 623/Bang/2023 for the assessment year 2020-21 passed by the Income Tax Appellate Tribunal, “A” Bench, Bangalore (for short “Tribunal”).

The Revenue has raised the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal’s order is perverse in nature in setting aside the additions made in assessment order by relying the judgment of the Hon'ble Apex Court in case of Engineering Analysis Center of Excellence Pvt. Ltd. V/S CIT (reported in 432 ITR page 471) without appreciating that in the case of assessee facts are not similar since assessee in present case dealt with customized software and not shrink-wrapped software and moreover when Review Petition filed by Revenue is pending for adjudication before Supreme Court in case of Engineering Analysis Centre of Excellence4?

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in disregarding the findings rendered by Assessing Officer that the provisions of the DTAA between India-UK with regard to Royalty are to be interpreted in harmony with the Section 9 of the Act?

Whether on the facts and in the circumstances of the case, the Tribunal’s order can

The respondent-assessee, a non-resident filed return of income for the assessment year 2020-21. The Assessing Officer completed the assessment by order dated 23.06.2023 holding that the income received on account of sale of software is taxable as Royalty, as per the provisions of the Income Tax Act and also India-UK Double Taxation Avoidance Agreement.

The Tribunal, on appeal by the respondent-assessee, following the judgment of the Hon’ble Supreme Court in the case of ENGINEERING ANALYSIS CENTRE FOR EXCELLENCE PRIVATE LIMITED v/s CIT AND ANOTHER reported in (2021) 432 ITR 472 (SC) held

Sri.Sushal Tiwari, learned Standing Counsel appearing for the appellant-Revenue submits that in addition to sale of software, the respondent-assessee was providing other ancillary services namely, periodical upgrading of the software, etc., and the said services are not charged. It is submitted that without these ancillary services, the software cannot be used. With this submission, learned counsel also submits that the judgment of the Hon’ble Supreme Court in ENIGNEERING ANALYSIS (supra) is not applicable to the facts of the present case.

Sri.Vishal Kalra, learned counsel appearing for the respondent-assessee submits that the services rendered after sale of software is not resulted in transfer of copyright in the software. Hence, the law laid by the

Having considered the submissions of the learned counsel for the parties, the Assessing Officer has held that the income received on account of sale of software as Royalty. The Dispute Resolution Panel considering that after sales services were rendered held that the case is distinguishable and the judgment of the Hon’ble Supreme Court in ENGINEERING ANALYSIS is not applicable. The Tribunal, on detailed analysis of the agreement in question, by following its earlier order wherein the judgment of the Hon’ble Supreme Court in ENGINEERING ANALYSIS was applied, held that the income from sale of software is not taxable as Royalty.

We have considered the finding recorded by the Assessing Officer and the Dispute Resolution Panel to distinguish the judgment of the Hon’ble Supreme Court. From examination it is clear that the post sale services

We find no substantial questions of law arising from the order of the Tribunal to entertain this appeal. Accordingly, the appeal is dismissed.