17. [2020] 117 taxmann.com 983 (Delhi – Trib.) Mentor Graphics Ireland
Ltd. vs. ACIT ITA No. 3966/Del/2017 A.Y.: 2014-15 Date of order: 9th
July, 2020
Article12 of the India-Ireland DTAA – Consideration received by the
assessee for supply / distribution of its copyrighted software products was not
chargeable to tax in India as royalty under Article 12 of India-Ireland DTAA
FACTS
The assessee, an Ireland resident company, received consideration for
sale of software and provision of support services. According to the assessee,
it had received consideration for sale of copyrighted product and not for sale
of copyright and hence, in terms of Article 12 of the India-Ireland DTAA, such
consideration was not chargeable to tax in India. However, it offered income
from support services to tax.
Relying upon the Karnataka High Court decisions in the case of Samsung
Electronics Company Ltd2 and Synopsis International
Old Ltd.3, the A.O. and the DRP held that the consideration
received by the assessee for supply / distribution of copyrighted software
products was for grant of ‘right to use’ of the copyright in the software and
hence it qualified as ‘royalty’.
Being aggrieved, the assessee appealed before the Tribunal.
HELD
- In
earlier years, on an identical issue in the assessee’s case4,
the Tribunal had ruled in favour of the assessee.
- Further,
in DIT vs. Infrasoft Ltd.5 , the jurisdictional
High Court had held that receipt from sale of software by the assessee in
that case was not royalty under Article 12 of the India-Ireland DTAA.
- Accordingly,
income from sale of software was not in the nature of ‘royalty’ under
Article 12 of the India-Ireland DTAA and was not taxable in India.
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2
345 ITR 494 (Kar)
3 212 Taxman 454 (Kar)
4 ITA No. 6693/Del/2016 relating to Assessment
Year 2013-14
5 [2013] 220 Taxman 273 (Del.)
