In a major relief to Microsoft, the Delhi High Court has dismissed an appeal filed by the department upholding the ITAT order 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.
The department approached the High Court contending 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.
The bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora relied on the decisions in EY Global Services Limited vs. Assistant Commissioner of Income Tax & Anr., and EYGBS (India) Private Limited vs. Joint Commissioner of Income Tax & Ors wherein it was held that the payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), does not amount to ‘royalty’ liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA.
“Since, the issue of law raised in the present appeals has been conclusively decided in the favour of the assessee by the Supreme Court, no substantial question of law arises for consideration in the present appeals. It is also pertinent to mention that the appellant had admitted before the ITAT that the dispute in question had been decided in favour of the assessee by the Tribunal in earlier years,” the Court observed.
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