Sale of Software program shouldn’t be “Royalty” beneath Article 12(3) of Indo-US Treaty: ITAT

The Delhi Income Tax Appellate Tribunal has not too long ago held that sale of software program shouldn’t be royalty beneath article 12(3) of Indo –US treaty.

Assessee Moogsoft Inc is a non-resident company entity, integrated in the US of America (USA) and tax resident of the USA. The assessee is engaged in growing know-how for enterprise IT operations and improvement operations and supplies operational intelligence options.

Whereas the evaluation process the assessing officer discovered that assessee bought software program to HCL Expertise Ltd. and Infosys Ltd. for his or her inner use and obtained license payment.Assessed declare that the quantity obtained from the sale of software program aren’t in nature of royalty beneath article 12(3) of the India –USA DTAA.With out contemplating the declare assessing officer treating the quantity obtained as royalty. In opposition to this evaluation order assesee filed an attraction earlier than the ITAT.

Nageshwar Rao, counsel for the assessee contended that the quantity obtained by the assessee was from sale of software program merchandise that are copyrighted articles.

Referring to Article 12(3) of India –USA DTAA defining royalty and the quantity obtained was not for using or proper to make use of of any copyright, literary, creative or scientific work or any secret system or course of.

Sanjay Kumar counsel for the income submits that the quantity obtained by the assessee in the direction of sale of software program is within the nature of royalty beneath Article 12(3) of India – USA DTAA.

After contemplating the contentions of the each side the division bench of the ITAT comprising G.S. Pannu, (President) and Saktijit Dey, (Judicial Member) allowed the attraction filed by the assessee and the bench noticed that, quantity obtained by the assessee from sale of software program shouldn’t be within the nature of royalty beneath Article 12(3) of India USA DTAA.

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M/s. Moogsoft Inc. vs The Commissioner of Revenue Tax (Appeals) -43

Counsel for Appellant:   Sh. Nageshwar Rao, Ms. Deepika Aggarwal

Counsel for Respondent:   Sh. Sanjay Kumar

CITATION:   2023 TAXSCAN (ITAT) 572