PR COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) vs. M/S IBM SINGAPORE PTE LTD

The Revenue is in appeal against the order of the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (hereinafter referred to as ‘ITAT’), in ITA No.409/Bang/2018 for the Assessment Year 2013-14, dated 11.10.2021.

The Revenue has raised the following substantial questions of law:

Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in holding that the payments made to non-resident entities were not in the nature of royalty as defined in Explanation 2 to Section 9(1)(vii) of the Act and the Double Taxation Avoidance Agreement as well"?

Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in holding that the sale of software license did not include a right or interest in copyright, which thus did not give rise to payment of royalty and would be an income deemed to accrue in India under section 9(1)(vi) of the Act, requiring the deduction of tax at source"?

Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in not considering the fact that the development of advanced cloud-based computer software by the assessee would not come under copyright as envisaged in Section 14(a)/14(b) of the Copy Right Act"?

Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in not appreciating that conditions for holding applying Explanation 2(v) to Section 9(1)(vi) of the Act were fully satisfied in present case as payments were made to a non- resident by way of royalty for use of or the right to use any copy right and Review Petition filed by Revenue is pending for adjudication before Supreme Court in case Engineering Analysis Centre of Excellence (reported in 432 ITR page 471)?"

The Tribunal, by following its earlier order in ITA Nos.1311 to 1313/Bang/2018 for the Assessment Years 2009- 10, 2010-11, and 2012-13, held that the payments received by the Assessee from IBM India towards the supply of software do not constitute royalty within the meaning of Section 9(1)(vi) of the Income Tax Act, 1961, and the Double Taxation Avoidance Agreement between India and Singapore.

The Revenue, challenging the order of the Tribunal in ITA Nos.1311 to 1313/Bang/2018, dated 03.09.2021, preferred appeals in ITA No.681/2023 and connected matters. This Court, by judgment dated 12.08.2025, rejected the appeals, holding that the questions raised are squarely covered by the judgment of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-tax and Another.1.

Learned counsel for the respondent-Assessee submits that the substantial questions of law raised in this appeal are covered by the earlier order of this Court. Learned Senior Standing Counsel for the Revenue does not dispute the same.

On perusal of the order of the Tribunal, we note that the Tribunal has followed its earlier order in ITA Nos.1311 to 1313/Bang/2018, dated 03.09.2021. The appeals filed by the Revenue against the said order of the Tribunal are accordingly dismissed.

In light of the judgment of this Court in ITA No.681/2023 and connected matters, we find no reason to take a different view. Accordingly, in terms of the said order, the appeal is dismissed.