ITAT: Software & Automated Services Given by Adobe Are Not Taxable in India

There is no tax levied in India on the receipt by Adobe from the supply of software and automated services, the New Delhi bench of the Income Tax Appellate Tribunal (ITAT) has stated.

Adobe Systems Software Ireland Ltd., the taxpayer has contested the final assessment orders issued under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (‘the Act’) about assessment years 2018-19 and 2019-20.

The taxpayer would be the non-resident corporate entity started in Ireland and a tax resident of Ireland. From the Assessing Officer, the taxpayer would be the wholly owned subsidiary of Adobe System, USA, and is committed to licensing software in India via distributors to the end users.

The software licensed via the taxpayer is the intellectual property of Adobe Systems, USA, which in turn, provides the right to license the software to the taxpayer via another subsidiary, Adobe Software Trading Company Ltd.

On the refund of income tax, the taxpayer has made interest and would furnish to tax income made via training services that consist of the human interruption and interest on the income tax refund. The income made via the supply of software and the automated services claimed would not be levied to tax in India according to the treaty provision.

DRP complying with their rules in the former assessment years at the time of deciding the objection of the taxpayer stated that the taxpayer would secure the dependent agent PE in India, therefore tax is to be levied on the income from PE.

In the case of assistant director of the income tax-I, New Delhi v. M/s. E-Funds IT Solution Inc., [2017], it stated that there is no profit from the person despite it posing a permanent establishment in India, once the arm’s length principle would get fulfilled.

Complying with the Coordinate Bench decisions in the matter of taxpayer, the coram consists of Shri G S Pannu, President, and Shri Saktijit Dey, Judicial Member deleted the additions incurred on the cause that the transactions between the taxpayer and its AE in the Indian being at arm’s length there is no subsequent profit that could be made from the PE. Authorization of the taxpayer appeals is considered.