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Income Tax Appellate Tribunal, “L” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& C.N. Prasad (JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the Revenue is directed against the order dated 12.6.2012 passed by the learned CIT(A)-11, Mumbai and it relates to A.Y. 2009-10.
The solitary issue urged in this appeal is whether the learned CIT(A) was justified in holding that the payment received by the assessee for supply of software was not in the nature of royalty and hence not liable for taxation in India.
We have heard the parties and perused the record. The assessee- company is incorporated under the laws of Singapore and tax resident of Singapore. It is engaged in the business of supply of software for airport sector. During the year under consideration, the assessee sold Airport IT system software to M/s. Siemens Information Systems Ltd. (SISL), an Indian company
2 UFIS Airport Solutions Pte Ltd. for a sum of Euro 4,10,000 (equivalent to ` 2.76 crores). The Assessing Officer took the view that the payment received by the assessee for supply of software is royalty as per Article 12 of Indo-Singapore Treaty and accordingly assessed the same. The learned CIT(A), by following the decision of Hon'ble Delhi High Court rendered in the case of DIT(IT) Vs. M/s. Ericsson A.B. (ITA No. 504/Mum/2007 dated 23.12.2011)(343 ITR 470) and also decision rendered by the Coordinate Bench of the ITAT in the case of DDIT(IT) Vs. M/s. Solid Works Corporation (ITA No.3219/Mum/ 2010) held that the profit derived from sale of software would fall under the head “business profit” and not “royalty”. The learned CIT(A) further held that business profit is not taxable in India as the assessee did not have permanent establishment in India. Accordingly he allowed the appeal filed by the assessee. Aggrieved, the Revenue has filed this appeal before us.
Learned AR placed reliance on the decision rendered by the Coordinate Bench in the case of DDIT Vs. Reliance Industries Ltd. (ITA No. 1980 and ors./Mum/2008 dated 18.5.2016) and also decision rendered by Hon'ble Delhi High Court in the case of DIT Vs. Infrasoft Ltd. (264 CTR 329) and submitted that the view taken by Hon'ble Delhi High Court in the case of Ericsson A.B. (supra) has been followed in the above two cases and accordingly he submitted that the decision taken by the learned CIT(A) does not call for any interference.
Learned AR also furnished copies of invoices raised by the assessee on SISL and submitted that the software supplied by the assessee falls in the category of ‘shrink wrapped software’ and buyer does not have right to access to the source code.
On the contrary, learned Departmental Representative placed reliance on the order passed by the Assessing Officer and submitted that the decision rendered by Hon’ble Karnataka High Court in the case of CIT Vs. Samsung Electronics Co Ltd. (345 ITR 494) is in favour of the revenue.
3 UFIS Airport Solutions Pte Ltd.
Having regard to the rival submissions, we are of the view that the decision rendered by the learned CIT(A) does not call for any interference as he has followed the decision rendered by Hon'ble Delhi High Court in the case of Ericsson A.B. (supra). We further noticed that Hon'ble Delhi High Court has reaffirmed its view in the subsequent decision rendered in the case of Infrasoft Ltd. (supra). The Co-ordinate bench of Tribunal has considered the decisions rendered by Hon’ble Karnataka High Court and Hon’ble Delhi High Court and held that the purchase of shrink wrapped software would not result in payment towards royalty. In view of the above, we affirm the order passed by the learned CIT(A).
In the result, appeal filed by the Revenue is dismissed.
Order has been pronounced in the Court on 17.2.2017.