ITAT Declares Income as Tax-free from Software License & Services

The Pune bench Income Tax Appellate Tribunal (ITAT) specified that the income made through IT support services and software licenses would not be levied with any tax. The taxpayer, BMC Software Asia Pacific Pte Ltd is working in selling Software products to end users and customers, and the Assessing Officer (AO) revealed that the taxpayer has earned an income of Rs 109,01,25,420 through selling the software licenses along with the support services concerning to it, this was not provided for the taxation on the basis of the first item was with the sale of the software licenses. 

An impugned order has been passed by AO along with the IT Support service charges of Rs.42.42 crore in the total income. The income made through the sale of the software licenses in the current case comes under para 3(a) of Article 12 however it ruled by DRP does not satisfy the condition of the taxability of the income through the support and maintenance charges of the licensed software would come beneath para 4(a & b) however unable to draw the taxability with its purview.

Tribunal treated the software royalty as DRP in the former orders does not draw any distinction and ruled the whole amount levied to tax as royalty in the light of the decision in Samsung (supra). The judicial member Shri R S Syal, vice president, and Shri Partha Sarathi Chaudhury has finalized the income from IT Support services despite the same viewed independent of the software license income would not get levied to tax and the addition of Rs 42.42 crore rendered to be deleted. The petition was permitted. 

Shri Farrokh V Irani represents the taxpayer and the revenue was shown by Shri Shishir Srivastava.