“Section 90(1)(vi)”
The decision most relied on for Section 90(1)(vi) is Engineering Analysis Centre of Excellence (P) Ltd. v. CIT (432 ITR 471), cited in 914 judgments on BharatTax.
Leading authorities on Section 90(1)(vi)
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.
Payments for the use of equipment, such as satellite transponders, do not constitute 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, or under applicable tax treaties, especially when there is no transfer of the right to use a process or underlying technology.
An amendment to the Income Tax Act, such as the Finance Act, 2012 amendment to Section 9(1)(vi) defining royalty, does not automatically override or alter the definition of 'royalty' as provided in a Double Taxation Avoidance Agreement (DTAA) unless the DTAA itself is bilaterally amended. The definition of royalty in a DTAA remains unaffected by unilateral changes to domestic law.
Reimbursements of actual expenses without any profit element are not taxable income. Additionally, mere amendments to the Income-tax Act do not override the provisions of Double Taxation Avoidance Agreements (DTAAs).
This case provides foundational principles that illuminate the contours of the concept of 'Permanent Establishment' (PE) under tax treaties, especially regarding a 'fixed place' PE.
Sections 4 and 5 of the Income Tax Act, which define total income and chargeability, are subject to Section 90, meaning that Double Taxation Avoidance Agreements (DTAAs) override the Act's provisions in case of a conflict.
For claiming relief under Chapter VI-A deductions like Section 80IB or 80IA, the audit report in Form 10CCB is not mandatory to be filed with the return of income, but can be submitted before the assessment is completed.
Expenditure on application software, which enhances business efficiency and requires a computer system to function, constitutes revenue expenditure rather than acquisition of a capital asset, even if it provides an enduring benefit.
