“computer software”

Chapter III - Incomes Not IncludedSection 10BSection 10B Explanation 2 / Section 80HHF951 judgments

The decision most relied on for computer software is Engineering Analysis Centre of Excellence (P) Ltd. v. CIT (432 ITR 471), cited in 914 judgments on BharatTax.

Leading authorities on computer software

Engineering Analysis Centre of Excellence (P) Ltd. v. CIT

432 ITR 471 · 2021 · Supreme Court

914

citing judgments

Payments for the supply or use of computer software, where there is no transfer of copyright but only a right to use the copyrighted product, are generally considered business profits and not 'royalty' or 'fees for technical services' under the Income Tax Act, 1961 or relevant DTAAs. This principle also applies to transponder fees, which are not taxable as royalty.

CIT v. Samsung Electronics Ltd.

345 ITR 494 · 2012 · High Court

461

citing judgments

Payments by Indian residents to non-resident foreign software suppliers for software are considered royalty, constituting income deemed to accrue in India under section 9(1)(v), thereby requiring tax deduction at source under section 195.

DIT v. Infrasoft Ltd.

39 Taxmann.com 88 · 2013 · High Court

269

citing judgments

Payments for the use of copyrighted software, without the transfer of any rights in the underlying copyright itself, do not constitute 'royalty' under the Income-tax Act or tax treaties. Such payments are often treated as business income, taxable only if a permanent establishment exists.

III v. HCL Technologies Ltd.

93 Taxmann.com 33 · 2018 · Supreme Court

245

citing judgments

When computing the deduction available under Section 10A of the Income-tax Act, communication expenses must be excluded from the total turnover for the purpose of calculating the eligible relief.

CIT v. Synopsis International Old Ltd.

212 Taxmann 454 · 2013 · High Court

177

citing judgments

Payments for computer software are treated as royalty income under Section 9(1)(vi) of the Income-tax Act, particularly concerning the expanded definition provided by Explanation 2 and Explanation 4.

CIT v. Asahi India Safety Glass Ltd.

346 ITR 329 · 2012 · High Court

129

citing judgments

Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.

Amway India Enterprises v. DCIT

111 ITD 112 · 2008 · ITAT

127

citing judgments

Depreciation is allowable on computer software, including software licenses, at the rate of 60%.

Kotak Mahindra Primus Ltd. v. DDIT

11 SOT 578 · 2007 · ITAT

citing judgments

Payments for data processing services using a mainframe computer and specialized software are not taxable as fees for the use of equipment if the Indian entity lacks independent rights or physical access to use the computer or software.

Judgments citing computer software

Deloitte Touche Tohmatsu India LLP, Mumbai vs. DCIT(International Taxation)-2(1)(2), Mumbai

In the result, all the appeals of the assessees are allowed

ITA 4775/MUM/2019[2018-19]Status: DisposedITAT Mumbai27 Jul 2022AY 2018-19

Bench: Shri Pramod Kumar & Shri Amit Shuklaita Nos.201 To 233/Mum/2021, : A.Ys : 2018-19 & 4800 To 4804/Mum/2019 & 2019-20 4810 To 4814/Mum/2019 Deloitte Haskins & Sells Llp Vs. Deputy Commissioner One International Center, Of Income Tax, (It) - Tower 3, 27Th - 32Nd Floor, 2(1)(2) Senapati Bapat Marg, Mumbai 400021 Elphinstone Road, (W) Mumbai 400013 [Pan: Aacfd4815A] Ita Nos. 4744, 4775 To : A.Y : 2018-19 4782/Mum/2019 Deloitte Touche Tohmatsu Vs. Deputy Commissioner India Llp, Of Income Tax, (It) - Indiabulls Finance Centre 2(1)(2) Tower 3, 27Th-32Nd Floor, Mumbai 400021 Senapati Bapat Marg, Elphinstone Road, (W) Mumbai 400013 [Pan: Aalfd7157J]

For Appellant: Shri P.J PardiwalaFor Respondent: Shri Milind Chavan

Section 195

background of the case submitted that the amounts in question cannot be regarded as payment for the use of copyright of literary work (computer software) as held by the Assessing Officer. In fact, it is purely for providing common policies, guidance relating to brand, communications and other aspects and collaboration ... Deloitte Haskins & Sells LLP & Anr. ITA Nos. 201 to 233/Mum/2021, 4800 to 4804, 4810 to 4814, 4744, 4775 to 4782/Mum/2019 copyright in computer software or any literary work as no right to use copyright is given by Holdings to the appellants. He further pointed out that before the Assessing Officer

Deloitte Touche Tohmatsu India LLP, Mumbai vs. DCIT (It)-2(1)(2), Mumbai

In the result, all the appeals of the assessees are allowed

ITA 4744/MUM/2019[2018-19]Status: DisposedITAT Mumbai27 Jul 2022AY 2018-19

For Appellant: Shri P.J PardiwalaFor Respondent: Shri Milind Chavan

Section 195

Dy. CIT, Circle 7(1) (1), Mumbai vs. M/S. Novartis Healthcare Pvt. Ltd, Mumbai

In the result, the appeal filed by the revenue is partly allowed for statistical purposes

ITA 453/MUM/2022[2016-17]Status: DisposedITAT Mumbai22 Jul 2022AY 2016-17

For Appellant: Shri Brijesh ParmarFor Respondent: Dr. Mahesh Akhade (DR)

appeal of the revenue is against the action of the Ld. CIT(A) in allowing the expenditure on license fees for use of computer software packages as Revenue expenditure, whereas, according to the revenue, the purchase of computer software and software development was Capital Expenditure since it provided enduring benefit ... assessee, software license fees was to the tune of Rs.5.35 crores out of which 5.25 crores was on account of license fees for “computer software packages” or user license expenses and the balance is towards maintenance expenses. It was pointed out by the assessee that these software packages get frequently

M/S. Hyagreeva Hotels & Resorts Private Limited, Bangalore vs. The Commissioner of Income Tax (Appeals)- 3, Bangalore

In the result, both the appeals by the assessee are dismissed

ITA 167/BANG/2020[2008-09]Status: DisposedITAT Bangalore18 Jul 2022AY 2008-09

Bench: Shri N.V. Vasudevan, Vice Preseident & Shri Padmavathy S

For Appellant: Shri Deepesh Wagle, CAFor Respondent: Smt. Priyadarshini Baseganni, Addl.CIT(DR)(ITAT)

Section 10ASection 139Section 139(1)Section 143(1)Section 147Section 148Section 80ASection 80I

section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall ... hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things

M/S. Hyagreeva Hotels & Resorts Private Limited, Bangalore vs. The Commissioner of Income Tax (Appeals)- 3, Bangalore

In the result, both the appeals by the assessee are dismissed

ITA 166/BANG/2020[2007-08]Status: DisposedITAT Bangalore18 Jul 2022AY 2007-08

Bench: Shri N.V. Vasudevan, Vice Preseident & Shri Padmavathy S

For Appellant: Shri Deepesh Wagle, CAFor Respondent: Smt. Priyadarshini Baseganni, Addl.CIT(DR)(ITAT)

Section 10ASection 139Section 139(1)Section 143(1)Section 147Section 148Section 80ASection 80I

M/S Te Connectivity India Pvt Ltd, Bengaluru vs. Deputy Commissioner of Income Tax, Ltu, Circle-1, Bengaluru

In the result, the appeal by the assessee is partly allowed

ITA 2680/BANG/2017[2013-14]Status: DisposedITAT Bangalore18 Jul 2022AY 2013-14

Bench: Shri N.V. Vasudevan, Vice Preseident & Shri Padmavathy S

For Appellant: Shri Sumeet Khurana, CAFor Respondent: Shri V.S. Chakrapani, CIT(DR)(ITAT), Bengaluru

Section 143(2)Section 143(3)Section 40Section 92

system had assisted in integrating all data and processes of TE Group into a single unified system with the usage of multiple components of computer software and hardware. With SAP being the preferred ERP being implemented the primary centre was based in Harrisburg, Pennsylvania, with other centers at Fuquay-Variana

M/S. Ibm India Private Limited, Bangalore vs. Asst. Commissioner of Income Tax, Bangalore

In the result, the appeals filed by the assessee for AY 2010-11 and 2011-12 are treated as partly allowed

ITA 773/BANG/2016[2010-11]Status: DisposedITAT Bangalore18 Jul 2022AY 2010-11

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaranit(Tp)A Nos.773 & 2041/Bang/2016 Assessment Years :2010-11 & 2011-12

For Appellant: Shri Ajay Rotti, C.A (A.R)For Respondent: Shri Dilip, Advocate, Standing

Section 10ASection 143(3)

present case, the assessee has continued the business already in existence without having any new contract agreement of alleged export of computer software. Hence the assessee is not eligible for deduction u/s 10AA of the Act. 5 IBM India Pvt. Ltd. IT(TP) A. Nos. 773 & 2041/Ban/2016 ... discussion made in the previous paragraph has revealed a fact that the assessee company could not substantiate its claim of manufacture and export of computer software from eligible STPI/SEZ unit. Section 10A/10AA gives tax benefit on the profits and gains derived by an undertaking from export of computer software that

M/S.Ibm India Private Limited, Bangalore vs. Assistant Commissioner of Income-Tax, Bangalore

In the result, the appeals filed by the assessee for AY 2010-11 and 2011-12 are treated as partly allowed

ITA 2041/BANG/2016[2011-12]Status: DisposedITAT Bangalore18 Jul 2022AY 2011-12

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaranit(Tp)A Nos.773 & 2041/Bang/2016 Assessment Years :2010-11 & 2011-12

For Appellant: Shri Ajay Rotti, C.A (A.R)For Respondent: Shri Dilip, Advocate, Standing

Section 10ASection 143(3)

DCIT, Bangalore vs. M/S Ibm India (P) Limited, Bangalore

In the result, the appeals filed by the assessee for AY 2010-11 and 2011-12 are treated as partly allowed

ITA 1228/BANG/2016[2010-11]Status: DisposedITAT Bangalore18 Jul 2022AY 2010-11

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaranit(Tp)A Nos.773 & 2041/Bang/2016 Assessment Years :2010-11 & 2011-12

For Appellant: Shri Ajay Rotti, C.A (A.R)For Respondent: Shri Dilip, Advocate, Standing

Section 10ASection 143(3)

Sitel India Ltd, Mumbai vs. DCIT RG 8(3), Mumbai

In the result, appeal by the Revenue is partly allowed

ITA 1777/MUM/2012[2007-08]Status: DisposedITAT Mumbai15 Jul 2022AY 2007-08

Bench: Shri Pramod Kumar & Shri Sandeep Singh Karhail

For Appellant: Shri Ajit Jain a/wFor Respondent: Shri Tejinder Pal Singh

Section 10ASection 250

direct and proximate nexus Sitel India Ltd. ITA No.1777/Mum./2012 and ITA no.1426/Mum./2012 with the activity of export of articles or things of computer software. Accordingly, the Assessing Officer excluded the training fees income for the purpose of computing deduction under section

Dy.CIT-8(3), Mumbai vs. Sitel India Ltd., Mumbai

In the result, appeal by the Revenue is partly allowed

ITA 1426/MUM/2012[2007-08]Status: DisposedITAT Mumbai15 Jul 2022AY 2007-08

Bench: Shri Pramod Kumar & Shri Sandeep Singh Karhail

For Appellant: Shri Ajit Jain a/wFor Respondent: Shri Tejinder Pal Singh

Section 10ASection 250

M/S Kennametal Inc, United States of America vs. Deputy Commissioner of Income Tax (International Taxation) Circle-1(2), Bangalore

In the result, the appeal for AY 2014-15 is treated as allowed for statistical purpose while the appeal for AY 2012-13

ITA 1658/BANG/2017[2014-15]Status: DisposedITAT Bangalore13 Jul 2022AY 2014-15

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2014-15

For Appellant: Shri K.R. Vasudevan &For Respondent: Shri Dilip, Standing Counsel for Dept

Section 143(3)

right, property, or information included and had always included the "transfer of all or any right for use or right to use a computer software". The court ruled that Explanation 4 to section 9(1)(vi) expanded the scope of royalty under Explanation 2 to section 9(1)(vi). Prior ... rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a nonexclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section

Income Tax Officer, Ward- 2(1)(2), Bangalore vs. M/S. Crane Software International Limited, Bangalore

In the result, the appeal filed by the Revenue is dismissed

ITA 214/BANG/2020[2012-13]Status: DisposedITAT Bangalore11 Jul 2022AY 2012-13

Bench: Shri George George K, Jm & Ms.Padmavathy S, Am

For Appellant: Sri.Sumer Singh Meena, CIT-DRFor Respondent: Sri.V.Srinivasan, Advocate

Section 143(2)Section 143(3)Section 41Section 41(1)

follows: 2 ITA No.214/Bang/2020. M/s.Crane Software International Private Limited. The assessee is a company engaged in the business of development, training & trading in computer software and related products. For the assessment year 2012-2013, the return of income was filed on 23.11.2022, declaring loss of Rs.26 ... No.214/Bang/2020. M/s.Crane Software International Private Limited. (vii) Copy of the purchase invoice and payment made through YES Bank Ltd for purchase of computer software. 9. The learned AR relied on the findings of the CIT(A) and reiterated the submissions made before the Income Tax Authorities. 10. We have heard

Gymnastics Sevabhavai Sanstha, Mumbai vs. CIT (Exemption), Pune

In the result, appeal filed by the assessee is partly allowed with above directions

ITA 2010/MUM/2020[2020-21]Status: DisposedITAT Mumbai07 Jul 2022AY 2020-21

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm Cit Exemption, Pune Gymnastics Sevabhavi Sanstha Room No. 322, 3Rd Floor, Flat No. 101, Building No.4, Income Tax Office, Raunak Park, Pokharan Road, Pmt Building, Vs. No.2, Kokanipada, Thane (W) Shankar Seth Road, Mumbai-400 606 Pune- 411 037 (Respondent) (Appellant) Pan No.Aactg 7323 G Assessee By : Shri Subodh Ratnaparkhi, Ar Revenue By : Shri Ashok Koli, Cit Dr Date Of Hearing: 01.06.2022 Date Of Pronouncement : 07.07.2022

For Appellant: Shri Subodh Ratnaparkhi, ARFor Respondent: Shri Ashok Koli, CIT DR

Section 12ASection 15Section 2Section 2(15)

establish and run public libraries, study circles, libraries, music schools, welfare centers, workshops centers for educational enrichment. 3. To undertake training programmes in computer software and hardware, to establish and run computer training centres and arrange lectures, discussion sessions for education relating to computer and all round development in said

Interactive Avenues Pvt. Limited, Mumbai vs. DCIT 14(2)(1), Mumbai

In the result, the appeal of the assessee is allowed

ITA 3130/MUM/2019[2015-16]Status: DisposedITAT Mumbai07 Jul 2022AY 2015-16

Bench: Us :-

Section 143(3)Section 40

been narrated as under:- “4. The appeals before us may be grouped into four categories: i) The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, non- resident supplier or manufacturer. ii) The second category of cases ... deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users. iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor

Sandisk India Device Design Centre Private Limited, Bengaluru vs. Joint Commissioner of Income Tax, Special Range-6, Bangalore

In the result, the appeal filed by the assessee stands partly allowed as indicated hereinabove

ITA 288/BANG/2021[2016-17]Status: DisposedITAT Bangalore30 Jun 2022AY 2016-17

Bench: Smt. Beena Pillai & Shri. Laxmi Prasad Sahuit(Tp)A No. 288/Bang/2021 Assessment Year : 2016-17 M/S. Sandisk India Device Design Centre Pvt. Ltd., Survey No. 143/1, Amani Bellandur Khane Village, The Joint Prestige Excelsior, Commissioner Of Prestige Tech Park, Income-Tax Marathalli – Sarjapur Outer (Osd), Ring Road, Circle 6 (1)(1), Vs. Kadubeesanahalli, Bangalore. Varthur Hobli, Bangalore – 560 103. Pan: Aaics9204M Appellant Respondent Assessee By : Shri Ajay Roti, Ca : Dr. Manjunath Karkihalli, Revenue By Cit Dr Date Of Hearing : 25-05-2022 Date Of Pronouncement : 30-06-2022 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against Final Assessment Order Passed By National E-Assessment Centre, New Delhi On 30.04.2021 For A.Y. 2016-17 On Following Grounds Of Appeal: “The Grounds Stated Hereunder Are Independent Of & Without Prejudice To One Another. The Appellant Submits As Under:

For Appellant: Shri Ajay Roti, CA

Section 92C(3)Section 92D

288/Bang/2021 development activities on its account that leads to development of non-routine intangibles. SanDisk India uses computer software to carry out its business activities. Tangible Assets SanDisk India employs necessary tangible assets required in respect of the above mentioned functions. Page 19 of 32 IT(TP)A No. 288/Bang/2021

M/S Harman International (India) Pvt Ltd, Bangalore vs. Deputy Commissioner of Income Tax Circle-3(1)(2), Bangalore

In the result, the appeal by the assessee is partly allowed

ITA 49/BANG/2019[2014-15]Status: DisposedITAT Bangalore30 Jun 2022AY 2014-15

Bench: Shri N. V. Vasudevan & Ms. Padmavathy Sit(Tp)A No.49/Bang/2019 Assessment Year : 2014-15 M/S. Harman Connected Services Vs. Deputy Commissioner Of Corporation India Private Limited, Income Tax, 4A, Jupiter, Prestige Technology Park, Circle - 3(1)(2), Sarjapur, Marathahalli Road, Bengaluru. Kadubeesanahalli Village, Bengaluru – 560 103. Pan: Aacch 1585 J Appellant Respondent Assessee By : Shri. T. Suryanarayana, Senior Advocate Revenue By : Dr. Manjunath Karkihalli, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 27.06.2022 Date Of Pronouncement : 30.06.2022 O R D E R Per N V Vasudevan

For Appellant: Shri. T. Suryanarayana, Senior AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 92Section 92C

passed by the AO in which, inter alia, the aforesaid TP adjustment was incorporated. The AO also proposed to restrict the depreciation claimed on computer software at 25% as opposed to 60% claimed by the assessee and proposed to disallow the provision for warranty in excess of the utilization ... TNMM becomes academic and hence not decided. 40. Corporate tax issues arising in the appeal: Ground No. 11 re. restriction of depreciation claimed on computer software: In this ground, the assessee is challenging the action of the Revenue in restricting the depreciation claimed on computer software at 25% instead

Ibm India Pvt. Ltd., Bangalore vs. DCIT, Bangalore

In the result appeal filed by assessee stands allowed

ITA 1151/BANG/2009[2002-03]Status: DisposedITAT Bangalore30 Jun 2022AY 2002-03

Bench: Shri. Chandra Poojari & Smt. Beena Pillaiassessment Year : 2002-03 M/S. Ibm India Pvt. Ltd., The Deputy No. 12, Subramanya Commissioner Of Arcade, Income Tax, Bannerghatta Road, Circle 11 (1), Bangalore – 560 029. Bangalore. Vs. Pan: Aaaci4403L Appellant Respondent Assessee By : Shri Sharath Rao, Advocate Revenue By : Shri Vilas V Shinde, Cit Dr Date Of Hearing : 30-06-2022 Date Of Pronouncement : 30-06-2022 Order Per Beena Pillaipresent Appeal Arises Out Of The Dated 3/11/2020 Passed By Hon’Ble Karnataka High Court In Ita No.392/2011. Hon’Ble High Court Admitted The Following Question Of Law Vide Order Dated 28/03/2012: “(I) Whether The Tribunal Was Correct In Holding That Whether The Appellate Authority Were Correct In Holding That Maintenance Of Separate Accounts For Stp Units & Non Stp Units Was Only Directory & Not Mandatory In Accordance With Rbi Conditions, Government Notification & Income Tax Act? (Ii) Whether The Appellate Authority Were Correct In Holding That Payments Made To Sub Contractors Who Have Separately Exported & Have Been Issued Foreign Inward Remittance Certificate & Have Also Claimed 10A Deduction Will Also Be Entitled To Double Deduction Under Section 10A Of The Act In Hands Of The Assessee?

For Appellant: Shri Sharath Rao, AdvocateFor Respondent: Shri Vilas V Shinde, CIT DR

Section 10A

tribunal was correct in holding that the expenses like freight, telephone charges and insurance attributable to the delivery of articles or things on computer software outside India reduced from export turnover should be reduced from total turnover while computing deduction under Section 10A of the Act? (iv) Whether the tribunal

Texas Instruments (India) Private Limited, Bangalore vs. Additional Commissioner of Income Tax Ltu, Bangalore

In the result, the appeal by the revenue is dismissed and the appeal by the assessee is partly allowed

ITA 852/BANG/2017[2009-10]Status: DisposedITAT Bangalore29 Jun 2022AY 2009-10

Bench: Shri N. V. Vasudevan & Ms. Padmavathy S

For Appellant: Shri. Percy Pardiwala, Sr. CounselFor Respondent: Shri. Sanjay Kumar S. K, CIT(DR)(ITAT), Bengaluru

Section 142(1)Section 143(2)Section 143(3)Section 40Section 80JSection 92C

data automation expenses treating it as revenue in nature. Before the AO, it was submitted that the expenditure represents amount incurred towards computer software including, but not limited to the cost of licensing software used by the designers for product design and verification [EDA software]. The EDA expenditure is allocated ... expenditure. The following were the relevant observations of the AO:- “5.3 The assessee's submission is carefully considered. The Data Automation Software is a computer software which is being used by the assessee for designing its products. Electronic design automation (EDA) is a category of software tools for designing electronic

Joint Commisioner of Income Tax (Ltu), Bangalore vs. M/S Texas Instruments India Pvt Ltd, Bangalore

In the result, the appeal by the revenue is dismissed and the appeal by the assessee is partly allowed

ITA 831/BANG/2017[2009-10]Status: DisposedITAT Bangalore29 Jun 2022AY 2009-10

Bench: Shri N. V. Vasudevan & Ms. Padmavathy S

For Appellant: Shri. Percy Pardiwala, Sr. CounselFor Respondent: Shri. Sanjay Kumar S. K, CIT(DR)(ITAT), Bengaluru

Section 142(1)Section 143(2)Section 143(3)Section 40Section 80JSection 92C