Assessee is a company incorporated in UK. It sells software products in India. it was held by the AO that the receipt of income from the sale of software products in India is taxable under the head ‘Royalty’ as per the provisions of section 9(1)(vi) of the Act read with Article 13 of the India-UK DTAA. The High Court relying on the case of DIT v. New Skies Satellite B.V. [2016] 382 ITR 114 (Delhi) (HC) and PCIT v. M. Tech India (P.) Ltd. [2016] 381 ITR 31 (Delhi) (HC) held that payment made by the reseller for the purchase of software for sale in Indian market could not be considered as royalty within meaning of Article 13 of India UK DTAA. Appeal of revenue was dismissed (AY. 2010-11, 2013-14)
CIT (IT ) v. Micro Focus Ltd. (2021) 431 ITR 136 /197 DTR 299/ 318 CTR 670 (Delhi) (HC)/Editorial: SLP is granted to the revenue CIT v. Micro Focus Ltd (2022) 284 Taxman 444( SC)
S. 9(1)vi): Income deemed to accrue or arise in India – Royalty -– Non-resident -Receiving consideration – Sale of software product – Not royalty – Not liable to tax – DTAA – India-UK [ Art .3(2), 13(3) ]