Income from license of software not assessable as “royalty”-- Gracemac not followed/Motorola still good law

Income from license of software not assessable as “royalty”. Gracemac not followed; Motorola still good law

 

ADIT vs. TII Team Telecom International Pvt Ltd (ITAT Mumbai)

The assessee, an Israeli company, entered into an agreement with Reliance Infocomm for supply and licence of software for RIL’s wireless network in India. The assessee received Rs. 3 crores which it claimed to be “business profits” and not taxable for want of a permanent establishment (PE) in India. The AO took the view that the said sum was assessable as “royalty”. This was reversed by the CIT (A) following Motorola Inc 96 TTJ 1 (Del) (SB). In appeal before the Tribunal, the department argued that in view of Gracemac Corp 42 SOT 550 (Del), the use of software was assessable as “royalty”. HELD dismissing the appeal:

 

For further details refer to:

 

http://praveenboda.blogspot.com/2011/08/income-from-license-of-software-not.html