Payments made for purchase of software: Scope of definition of the term ‘Royalty’ as per India-USA tax treaty
- The Assessee was engaged in the business of development and export of software. While making the assessment for assessment year 2009-10, the Assessing Officer, disallowed software license purchased by the Assessee at Rs. 1.72 crore treating the same as royalty under section 9(1)(vi) on which the Assessee had not deducted tax at source under section 195 read with section 40(a)(i).
- It was clear from the fact that the Assessee was engaged in the business of development and export of software, providing Computer Telephonic Integration, system integration, IT consulting services to customers.
- The Assessee had purchased the copyrighted software license from Acqueon Technologies Inc., USA of Acqueon AiQ and IVR connector as off-the-shelf software and used them to develop the application as per the requirements of the customers.
- Therefore, as was concluded by the Jurisdictional High Court, purchase of copyrighted articles, did not fall within the scope of section 9(1)(vi) of the Act. The Assessee had also consumed them to develop the application and sold them.
- In the absence of any findings from the Revenue that Acqueon Technologies Ltd Inc. USA was paid over and above the purchase price, its treatment that the impugned transaction fell under section 9(1)(vi) was not valid.