ITAT: No Tax Levy on Software Sale, AMC and Support Under IND-SG Pact

The Pune bench of the income tax appellate tribunal ITAT mentioned that there would be no income tax subjected to pay on the software licence sale, support, maintenance because of being a non-royalty beneath the India-Singapore tax pact.

The taxpayer is the owner of BMC software Asia pacific Pte ltd the company that has been started beneath the laws of Singapore and secures the tax resident of Singapore hence the taxpayer is a non-resident under the aspect of Indian income tax. The taxpayer revealed the amount of Rs 130,20,15,830 through the software licence sale and the support, maintenance and training services.

Beneath the scrutiny, the AO has provided the notice beneath sections 143(2) and 142(1) of the act. As per AO the mentioned receipts undergoes royalty and is subjected to the tax under the provision of section 115 of the act under the provision of Article 12 of India Singapore DTAA. In context to that, the taxpayer has seen that he is not the owner of the software licences and there is no access to edit the source codes in the techniques of the software programming and others.

The support, maintenance and training services provided for these software licences are sold either directly or indirectly via 3rd parties in India and the same would be allowed to distribute these software licences in the Asia Pacific region.

AO has not accepted the submissions of taxpayers and carried that receipts obtained by the taxpayers from the sale of the software licences are subjected to tax beneath article 12 of DTAA amid India-Singapore with the rate of 10%.

The bench consists of President, R.S.Syal and Judicial Member, S.S.Vishwanethra Ravi held that the receipt of Rs.130,20,15,830 obtained beneath the sale of the software licences and the support services do not get charged for tax u/s. 9(1)(vi) of the Act r.w. Article 12 DTAA between India and Singapore. Hence the final assessment order dated 09-10-2019 passed by the AO/ACIT (IT), Circle-1, Pune is set aside and the exclusive problem submitted by the taxpayer would be permitted.

“We note the Co-ordinate Bench, by placing reliance in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT reported in (2021) 432 ITR 472 (SC) held the receipt derived by the assessee under the sale of software licences and support services are not chargeable to tax in terms of section 9(1)(vi) of the Act r.w. Article 12 of DTAA. The ld. DR fairly conceded that the facts and circumstances in the year under consideration are similar to that of A.Y. 2010-11 in assessee’s own case, the court said.”