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II. Direct Tax Case laws:
1. DDIT
(IT) Vs. M/s Reliance Infocom Ltd. (Now known as Reliance
Communications Ltd), ITA No. 730/Mum/09, Date of Decision 06/09/2013,
ITAT-Mumbai
Section 9(1)(vi) of the Income Tax Act, 1961
Whether amount paid for supply of software which is not embedded in equipment is taxable as “royalty”.
Held: Yes
Facts: Reliance Infocomm Ltd., (now known as Reliance
Communications Ltd.) has entered into a Wireless Network General Terms
and Conditions contract and Wireless Software contract with Lucent
Technologies Hindustan Pvt. Ltd. (LTHPL), an Indian company of M/s.
Lucent group, USA and Wireless software Assignment and Assumption
agreement with LTHPL and Lucent Technologies GRL LLC (LTGL) USA towards
supply of software required for telecom network. The Reliance’s
contention was that the amount paid is not taxable in India as it was
for purchase of software and LTGL has no PE in India. AO after examining
the details of agreements held that assessee was getting only license
to use the software and is in the nature of royalty, taxable at 20%. The
Ld. CIT(A) held that amounts paid cannot be considered as royalty as
Reliance purchased ‘goods’ which is a copyrighted article and the
seller do not have PE in India.
In view of the agreement and various judicial pronouncements the hon’ble tribunal has held that there
is a distinction between a case where the software is supplied along
with hardware as part of the equipment and there is no separate sale of
the software and a case where the software is sold separately. In the
case, where the software is an integral part of the supply of equipment,
the consideration for that is not assessable as “royalty”. However,
in a case where the software is sold separately, the consideration for
it is assessable as “royalty”. On facts, the assessee had acquired the
software independent of the equipment. It had received a license to use
the copyright in the software belonging to the non-resident and the
supplier continued to be the owner of the copyright and all other
intellectual property rights. As there was a transfer of the right to
use the copyright, the payment made by Reliance to Lucent was “for the
use of or the right to use copyright” and constituted “royalty” under s.
9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA.
2. Rajinder Mohan Lal Vs Dy. CIT, ITA No. 224/2012, Date of Decision: 01.08.2013, High Court of Punjab & Haryana
Section: Section 56(2)(vi)(b) of Income Tax Act, 1961
Whether gifts received on occasion of marriage of daughter is also exempt for the assessee.
Held_No
The assessee has claimed exemption for the gifts received by him on
occasion of his daughter’s marriage from their relatives & friends.
But the AO disallowed the claim. Hon’ble High Court of Punjab &
Haryana held that there is no ambiguity in proviso (b) to Section
56(2)(vi) of the Act. The expression “individual” appearing is preceded
by the words “marriage” and therefore, relates to the marriage of the
individual concerned, i.e., the assessee and not to the marriage of any
other person related to him in whatsoever degree, whether as his
daughter or son. And confirm the addition made to the appellant's income
and the appeal, consequently, dismissed.
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