“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

M/S Total Environment Building Systems Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-7(1)(1), Bangalore

In the result, revenue’s appeal stands dismissed and the assessee’s appeals for A

ITA 46/BANG/2017[2011-12]Status: DisposedITAT Bangalore29 Jun 2022AY 2011-12

Bench: Shri. Chandra Poojari & Smt. Beena Pillai

For Respondent: Shri Vilas V Shinde, CIT DR

Section 250Section 37Section 40Section 43B

addition on account of claim of depreciation of INR 19,98.058 on account of non-deduction of tax at source in relation to computer software purchased under section 40(a)(ia) of the Act. 10. The CIT (A) has failed to appreciate that the claim of depreciation is towards recoupment ... account of claim of depreciation of INR 6,00,000 on account of non-deduction of tax at source in relation to computer software purchased under section 40(a)(ia) 8. The learned CIT(A) has failed to appreciate that the provisions of Section 40(a)(ia) is not applicable

Total Environment Building Systems Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-7(1)(1), Bangalore

In the result, revenue’s appeal stands dismissed and the assessee’s appeals for A

ITA 45/BANG/2017[2010-11]Status: DisposedITAT Bangalore29 Jun 2022AY 2010-11

Bench: Shri. Chandra Poojari & Smt. Beena Pillai

For Respondent: Shri Vilas V Shinde, CIT DR

Section 250Section 37Section 40Section 43B

Deputy Commissioner of Income Tax Circle-7(1)(1), Bangalore vs. M/S Total Environment Building Systems Pvt Ltd, Bangalore

In the result, revenue’s appeal stands dismissed and the assessee’s appeals for A

ITA 40/BANG/2017[2010-11]Status: DisposedITAT Bangalore29 Jun 2022AY 2010-11

Bench: Shri. Chandra Poojari & Smt. Beena Pillai

For Respondent: Shri Vilas V Shinde, CIT DR

Section 250Section 37Section 40Section 43B

M/S. Nicholas Piramal India Ltd, Mumbai vs. The ACIT Cur 7(1)

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

ITA 769/MUM/2008[2004-2005]Status: DisposedITAT Mumbai28 Jun 2022AY 2004-2005

Bench: Shri Pavan Kumar Gadale & Shri S Rifaur Rahmanpiramal Enterprises Ltd Vs. Acit, Circle – 7(1) (Formerly Known As Aayakar Bhavan Piramal Healthcare Ltd) Mumbai – 400020. (Before Known As Nicholas Piramal Ind) Piramal Tower, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400013. Pan/Gir No. : Aaacn4538P Appellant .. Respondent Dcit, Circle – 7(1) Vs. Piramal Enterprises Ltd Aayakar Bhyavan (Formerly Known As Mumbai – 400 020. Piramal Healthcare Ltd) (Before Known As Nicholas Piramal Ind) Piramal Tower, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013. Pan/Gir No. : Aaacn4538P Assessee By : Mr.Ronak Doshi & Ms.Manshi Padhiyar.Ar Revenue By : Mr.S.N.Kabra.Dr

For Appellant: Mr.Ronak Doshi &For Respondent: Mr.S.N.Kabra.DR

Section 143(3)Section 145Section 32Section 35Section 80

second disputed issue with respect of depreciation on computers and computer software, the A.O observed that the assessee has claimed the depreciation @ 60% which is higher and the contentions raised before the A.O. that the claim is correct but the AO has restricted @ 25% rate and disallowed the excess claim ... find merit in this ground of appeal of the revenue and is dismissed. 12. On the claim of depreciation on computer software. We find that the CIT(A) has dealt at Para 2 and observed at page 6 as under and partly allowed the ground of appeal: The submissions

M/S Altisource Business Solutions Private Limited, Bangalore vs. Income Tax Officer Ward-1(1)(1), Bangalore

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

ITA 3368/BANG/2018[2014-15]Status: DisposedITAT Bangalore24 Jun 2022AY 2014-15

Bench: Shri N. V. Vasudevan & Ms. Padmavathy Sit(Tp)A No.3368/Bang/2018 Assessment Year : 2014-15 M/S. Altisource Business Solutions Pvt. Ltd., Vs. Ito, Pritech Park, Block Nok.12, 3Rd Floor, 5Th Ward – 1(1)(1), Floor, B-Wing & 4Th Floor, B-Wing, Bengaluru. Bellandur Village, Bengaluru-560 103. Pan : Aaaco 9467 A Appellant Respondent Assessee By : Smt. Rashmi R, Advocate Revenue By : Shri. V. S. Chakrapani, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 21.06.2022 Date Of Pronouncement : 24.06.2022 O R D E R Per N V Vasudevan

For Appellant: Smt. Rashmi R, AdvocateFor Respondent: Shri. V. S. Chakrapani, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 144C(13)Section 92Section 92B

category of “intangible assets” and depreciation may be accordingly allowed. In this regard, we like to point out that the Act has not categorized "computer software as separate asset. Computer software embedded in the computer only can be 'characterized under "plant and machinery". On the other hand, "license fee" falls

M/S. Bangalore International Airport Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 1(1)(2), Bangalore

The appeal of the assessee is partly allowed

ITA 567/BANG/2020[2012-13]Status: DisposedITAT Bangalore21 Jun 2022AY 2012-13

Bench: Shri N V Vasudevan & Ms. Padmavathy Sassessment Year : 2012-13

For Appellant: Smt. Tanmayee Rajkumar, AdvocateFor Respondent: Shri Sanjay Kumar S.R., CIT(ITAT), Bengaluru

Section 115JSection 143(3)Section 250

Asahi India Safety Glass Ltd. [2011] 15 taxmann.com 382 (Delhi) and certain other judicial pronouncements to submit that the expenditure incurred on computer software which has a short duration should be treated as revenue in nature. 12. The AO rejected the submissions of the assessee on the ground that

M/S Axa Group Solutions Private Limited, Bangalore vs. Assistant Commissioner of Income Tax Circle-1(1)(2), Bangalore

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

ITA 181/BANG/2019[2012-13]Status: DisposedITAT Bangalore17 Jun 2022AY 2012-13

Bench: Shri George George K. & Ms. Padmavathy S

For Appellant: Smt. Tanmayee Rajkumar, Advocate

Section 143(3)Section 14ASection 92C

this regard. However, the AO proceeded to make the disallowance on the ground that as per Income Tax Rules computers including computer software is to be classified under a separate Block of Assets and held that the computer software is capital in nature. The AO allowed the depreciation

Ibm India Private Limited, Bangalore vs. Joint Commissioner of Income Tax, Circle-3(1)(1), Bangalore

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

ITA 179/BANG/2022[2008-09]Status: DisposedITAT Bangalore15 Jun 2022AY 2008-09

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Ajay Rotti, A.RFor Respondent: Dr. Manjunath Karkihalli, D.R

Section 10ASection 143(3)Section 154Section 40

failed to produce the relevant documents and cogent evidence in support of its claim, and has failed to prove receipt of sale proceeds of computer software exported out of India is being brought into India. 2.5. The Hon'ble DRP has erred in not considering the request made

M/S. Citrix R & D India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 2(1)(1), Bangalore

In the result the appeal filed by the assessee is allowed for statistical purposes

ITA 2428/BANG/2019[2015-16]Status: DisposedITAT Bangalore15 Jun 2022AY 2015-16

Bench: Shri Chandra Poojari & Shri George George K.

For Appellant: Shri Sumeet Khurana, A.RFor Respondent: Ms. Neera Malhotra, D.R

business. Besides, as per the information in the Asset Schedule (at page 11 of Annual report), the intangible assets comprised of Intellectual Property and computer software. The value of Intellectual Property as on 31.03.2013 was Rs.67 million, as on 31.03.2014 Rs.15 million and as on 31.03.2015 Rs.2 Trillion which ... insignificant and meagre in regard to its Asset Portfolio of Rs.6407 million; Rs.3436 million & Rs.4626 million in the corresponding period. The computer software refer to routine computer licenses & not Intellectual Property generated by the company. Besides, Ld. DRP also noted that as per information in the annual report at page

M/S Applied Materials India Private Limited, Bangalore vs. Income Tax Officer Ward-1(1)(1), Bangalore

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

ITA 3403/BANG/2018[2014-15]Status: DisposedITAT Bangalore08 Jun 2022AY 2014-15

Bench: Shri George George K. & Ms. Padmavathy S

For Appellant: Smt. Tanmayee Rajkumar, AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bangalore

Section 143(3)Section 92(1)Section 92ASection 92B(1)Section 92C

than 180 days.” 44. It is submitted that during the relevant year, the assessee had made additions to the block of assets ‘Computer including computer software’ of Rs.12,19,28,624/-. In the said block, it had added certain computer peripherals, and claimed depreciation on the entire block of assets ... connected to, and accessible through the computer system alone. The AO restricted the depreciation to 15% on the basis that the assets were not computer software eligible for depreciation at 60% and were instead electronic items. The DRP upheld the AO’s order that the assets are not integral part

The Dy.Citi -Cir 3(3) (2), Mumbai vs. M/S. Park Air Systems Ltd, Mumbai

In the result, appeal by the Revenue is dismissed

ITA 2362/MUM/2021[2015-16]Status: DisposedITAT Mumbai07 Jun 2022AY 2015-16

Bench: Shri Pramod Kumar & Shri Sandeep Singh Karhail

For Appellant: Shri Ashish K. Gupta, C.AFor Respondent: Shri Milind Chavan, Sr. DR

Section 250Section 9(1)(vi)

case of Engineering Analysis Centre of Excellence (P) Ltd.v.CIT [2021] 125 taxmann.com 42 (SC) in holding that the payment for use of computer software cannot be regarded as royalty without examining whether the facts of the impugned case is same as in the case of Engineering Analysis (supra

Mr.Santosh S Lad, Bangalore vs. The Deputy Commissioner of Income Tax Central Circle-2(3), Bangalore

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

ITA 1298/BANG/2018[2013-14]Status: DisposedITAT Bangalore06 Jun 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2013-14

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. Priyadarshini Basaganni, D.R

Technologies Private Limited literally holding 9999 of equity of the company. The company was incorporated 27th July, 2009 with objects of develop computer software, render computer consultancy service & develop and market other related products connected information technology industry. The entire funding for the day to day activities of company

Hewlett-Packard Globalsoft Private Limtied, Bangalore vs. DCIT, Bangalore

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes and the appeal of the revenue stands dismissed

ITA 835/BANG/2016[2011-12]Status: DisposedITAT Bangalore03 Jun 2022AY 2011-12

domestic sale proceeds 19. In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section10A of the IT Act are allowed only in Export Turnover but not from the Page 14 IT(TP)A Nos. 810 & 835/Bang/2016 Total Turnover then ... deduction u/s. 10A of the Act. Brief facts are as under: 6.1 During the course of assessment proceedings, the Ld.AO enquired onsite development of computer software. In this regard, Page 17 IT(TP)A Nos. 810 & 835/Bang/2016 it was submitted that, the assessee is engaged in the software development

DCIT, Bangalore vs. M/S Hewlett Packard Globalsoft Pvt. Ltd., Bangalore

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes and the appeal of the revenue stands dismissed

ITA 810/BANG/2016[2011-12]Status: DisposedITAT Bangalore03 Jun 2022AY 2011-12

Immarsat Global Ltd., Mumbai vs. Dy CIT (International Taxation) Range-2(2)(1), Mumbai

In the result, the appeal is allowed

ITA 1031/MUM/2021[2017-18]Status: DisposedITAT Mumbai31 May 2022AY 2017-18

Section 143(3)Section 9(1)(vi)

Branch, which has been incorporated above, it is evident that the Head Office only has the non–exclusive non– transferrable rights to use the computer software brought for personal use and clause 16 of the said agreement specifically provides that the Head Office does not have any right to assign ... license or otherwise transfer the license of this agreement. Thus, the payment by the Branch for use of computer software is not the right in the copy right but only for doing the work from the said software which subsist in the copy right of the software. The branch

Factiva Limited, Mumbai vs. DCIT (It) - 2(3)(1), Mumbai

ITA 6455/MUM/2018[2015-16]Status: DisposedITAT Mumbai31 May 2022AY 2015-16

Bench: Shri M. Balaganesh & Shri Kuldip Singhassessment Year: 2015-16

For Appellant: Shri Dhanesh Bafna, A.RFor Respondent: Shri Rajneesh Yadav, D.R

Section 13(3)(a)Section 271(1)(c)Section 9(1)(vi)

also relevant. A person can be said to have acquired a copyright or the right to use the copyright in a computer software or database (as described by the Assessing Officer), where he is authorized to do all or any of the acts as per the definition of the term

M/S. L G Soft India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 4(1)(1), Bengaluru

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

ITA 2412/BANG/2019[2015-16]Status: DisposedITAT Bangalore31 May 2022AY 2015-16

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri K.R. Vasudevan, A.RFor Respondent: Sri Pradeep Kumar, DR

Section 234ASection 92CSection 92E

information to indicate that the brand has impacted the revenue or profit of the company. The intangibles referred in the Asset Schedule represent the computer software, and business rights and as such does not refer to any IPR or license owned by the said IT(TP)A No.2412/Bang/2019

M/S. Madura Coats Private Limited, Bangalore vs. Deputy Commissioner of Income Tax., (International Transaction), Circle- 1(2), Bangalore

In the result, appeals filed by assessee for A

ITA 1345/BANG/2019[2017-18]Status: DisposedITAT Bangalore31 May 2022AY 2017-18

Bench: Smt. Beena Pillai & Ms. Padmavathy Sit(It)A Nos. 1344 & 1345/Bang/2019 Assessment Years : 2016-17 & 2017-18 M/S. Madura Coats Pvt. The Deputy Ltd., Commissioner Of 7Th Floor, Jupiter Income Tax Prestige Technology (International Park, Vs. Taxation), Outer Ring Road, Circle – 1(2), Bangalore – 560 103. Bangalore. Pan: Aabcm8297K Appellant Respondent Assessee By : Shri Ajay Rotti, Ca : Shri Shehnawaz Ul Rahaman, Revenue By Addl. Cit (Dr) Date Of Hearing : 13-04-2022 Date Of Pronouncement : 31-05-2022 Order Per Beena Pillaipresent Appeals Are Filed By Assessee Against Order Dated 30.03.2019 Passed By Ld.Cit(A)-12, Bangalore For A.Ys. 2016-17 & 2017-18. It Is Submitted That The Issues Alleged By Assessee In Both These Years Are Identical & On Similar Facts. 2. Brief Facts Of The Case Are As Under: 2.1 Madura Coats Pvt Ltd (Mcpl) Is An Indian Company Carrying On The Business As Manufacturer & Merchant Of Sewing Threads & Other Goods, Possesses The Requisite Expertise & Experience By Virtue Of Having Several Qualified Personnel In Its Employment. During The Course Of Verification Conducted Us

For Appellant: Shri Ajay Rotti, CA

Section 195Section 201(1)

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 Hon’ble Court held that, Explanation 4 to section 9(1)(vi) expanded the scope of ‘royalty’ under Explanation 2 to section

M/S. Madura Coats Private Limited, Bangalore vs. Deputy Commissioner of Income Tax., (International Transaction), Circle- 1(2), Bangalore

In the result, appeals filed by assessee for A

ITA 1344/BANG/2019[2016-17]Status: DisposedITAT Bangalore31 May 2022AY 2016-17

For Appellant: Shri Ajay Rotti, CA

Section 195Section 201(1)

M/S Honeywell Technology Solutions Lab Private Limited, Bangalore vs. Joint Commissioner of Income Tax Special Range-3, Bangalore

ITA 2890/BANG/2018[2011-12]Status: DisposedITAT Bangalore30 May 2022AY 2011-12

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaranm/S Honeywell Technolgoy Solutions Jt. Cit, Special Range 3 Pvt. Ltd. 2Nd Floor, Bmtc Building Survey No. 96 & 97, Boganahalli 6Th Block, Koramangala Village & Survey No. 72/2 & 72/5 Vs. Bengaluru 560095 Doddakananahalli Village Varthur Hobli, Bengaluru East Taluk, Bengaluru 560103 Pan – Aaach4151J Appellant Respondent Appellant By: Smt. Shreya Loyalaka, Advocate Respondent By: Shri Sumer Singh Meena, Cit-Dr Date Of Hearing: 30.03.2022 Date Of Pronouncement: 30.05.2022

For Appellant: Smt. Shreya Loyalaka, AdvocateFor Respondent: Shri Sumer Singh Meena, CIT-DR

Section 2Section 2(2)Section 80J

expenses (d) of Legal and Professional fees. (e) Deduction of education cess paid. 2. The assessee is engaged in the business of development of computer software and providing I T enabled services. The return of income was filed by the assessee for the year under consideration declaring total income ... revenue expenditure. The AO noticed that the above said claim consisted of Annual maintenance charges for Computer licenses – Rs.17.50 crores and purchase of computer software – Rs.15.37 crores. The assessee submitted that it has not deducted tax at source on the amount of Rs.11.42 crores, 8 M/s Honeywell Technolgoy Solutions