Sale of software license to end user customers in India shall be considered as royalty

If non- resident company receives consideration from sale of software license to end user customers in India through its distributors and their retailers then such consideration shall be royalty in hands of seller. Thus, Sale of software license to end user customers in India shall be considered as royalty.

Case: Autodesk Asia Pte Ltd. vs. Joint Director of Income Tax

 

Facts:

The assessee was a Singapore based company engaged in the business of sale and distribution of software and providing ancillary services to Indian distributors.

During the relevant Assessment Years, the assessee filed its return declaring NIL taxable income. The case was selected for scrutiny. The AO noticed that during relevant year, the assessee had effectively sold the software license to end user customers in India through its distributors and their retailers.  The AO held such income as Royalty and thus, made the said additions.

The DRP upheld the order of the AO.

Aggrieved by the order, the assessee appealed to the Tribunal.

 

Held:

The assessee argued that since it did not have any physical presence in India, the sales of software were made outside India and the sale proceeds for the sales, and ancillary services were received outside India thus, no amount should be deemed to accrue or arise to it in India.

The Tribunal opined that income from Royalty and Fees for Technical Services are concerned, the assessee’s presence in India is not necessary and its concerned place of business is immaterial. Even if the assessee rendered services from outside India, then also such income was chargeable to tax in India in accordance with the provisions of section 9(1)(vi) and 9(1)(vii); as had been clarified by the Explanation 2 to section 9(1)(i).

In the view of the above facts, it was held that sale of software license to end user customers in India shall be considered as royalty.

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