Amount paid by resident Indian distributors to non-resident computer software manufacturers/suppliers is not payment of royalty

IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH : BANGALORE

BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

IT(IT)A No.27/Bang/2021
Assessment Year : 2017-18

M/s Autodesk Asia Pvt. Ltd.,
3, Fusionopolis Way,
#10-21 Symiosis
Singapore – 138 633.
PAN – AAFCA 6398 D
APPELLANT 

Vs.

The Asst. Commissioner of
Income-Tax,
(Intl. Taxation),
Circle-1(1),
Bengaluru.
RESPONDENT

Revenue by : Shri Shishir Srivastava, CIT
Assessee by : Smt. Tanmayee Rajkumar,
Advocate

Date of Hearing : 06-04-2021
Date of Pronouncement : 14-06-2021

ORDER

PER BEENA PILLAI, JUDICIAL MEMBER

Present appeal has filed by assessee against order dated 31/11/2020 passed by the ITO (Intl. Taxation), Circle-1, Bangalore for assessment years 2017-18 on following grounds of appeal:- 

Brief facts of the case are as under:-

2. The assessee is a Singapore based company. It was submitted that assessee is engaged in the business of distribution of Computer Software and providing ancillary services to its Indian distributors/customers. In certain cases assessee also sold hardware to Indian parties. It is submitted that the sale of software/hardware was made outside India, and the sale proceeds of the sale/ancillary services from the Indian distributors/customers were received by assessee outside India. 

2.1 For year under consideration, the assessee filed return of Income declaring Nil taxable income. The return was selected for scrutiny. The Ld.AO observed that assessee received Rs.232,34,01,380/- as consideration towards distribution of computer software/hardware and ancillary services to Indian distributors/customers. The Ld.AO while passing Draft Assessment order held that the consideration so received amounts to Royalty u/s 9(1)(vi) of the Act and Art 12 of IndiaSingapore DTAA.

2.2 The Ld.AO also proposed to tax the consideration received from Indian distributors/customers for sale of hardware as royalty on the basis that hardware and software are inseparable and that the software cannot function in the obscene of hardware. 

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