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DELHI HIGH COURT
MANMOHAN, MANMEET PRITAM SINGH ARORA
Commissioner of Income Tax-International Taxation-2 – Appellant
Versus
Microsoft Corporation – Respondent
| Table of Content |
|---|
| 1. introduction of appeals regarding taxation (Para 1) |
| 2. claim of taxation on software licensing (Para 2 , 3) |
| 3. supreme court's binding categorization of software cases (Para 4) |
| 4. supreme court's precedence in similar cases (Para 5 , 6) |
JUDGMENT
Manmohan, J. (Oral):
1. Present appeals have been filed under Section 260A of the Income Tax Act, 1961 [for short `Act'] challenging the judgment and order passed by ITAT on 13th May, 2019 for the Assessment Years 1997-98 and 19992000.
2. Learned counsel for the appellant-Revenue submits that ITAT has erred in holding that licensing of software products of Microsoft in the Territory of India by the Respondent was not taxable in India as Royalty under Section 9(1)(vi) of the Act read with Article 12 of the Indo US DTAA.
3. He states that the Tribunal has failed to appreciate that the distribution model in the case of the respondent-assessee involved making of multiple copies of the software clearly indicating transfer of copyright.
4. Having heard learned counsel for the appellant, this Court finds that the issue raised in the present appeals is no longer res integra as the Supreme Court in Engineering Analysis Centre
Software licensing fees received by Indian distributors from foreign manufacturers do not constitute taxable royalty under the Income Tax Act and relevant treaties.
Payments for software under licensing agreements do not constitute taxable royalty under Indian law, following precedent established by the Supreme Court.
Licensing payments for software access do not constitute royalty and are not taxable under the Income Tax Act, affirming distinctions between rights of use and copyright transfer.
The interpretation of the Income Tax Act, Indo US DTAA, and Copyright Act, 1957 in determining the taxability of software licensing in India.
A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a transaction is to authorise the end-user to have access to and make use o....
(1) No copyright exists in India outside provisions of Copyright Act or any other special law for time being in force.(2) Ownership of copyright in a work is different from ownership of physical mate....
The High Court upheld the ITAT's ruling that software receipts are not taxable as royalty under the India-UK DTAA, following binding Supreme Court precedent.
The principle of judicial discipline mandates that the High Court is bound to follow the judgment and order of the apex Court till it is set aside.
Payments for software deemed to be for copyrighted articles are not taxable as royalty, as established by precedent concerning copyright transfer under tax law.
Point of Law : A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright.
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