Income from authorized Indian distributor for sale of shrink wrapped software, taxable as royalty; Assessee’s own case from earlier year relied on, wherein Karnataka HC ruling in Samsung Electronics was followed : Bangalore ITAT

---

Bangalore ITAT in this case, has not referred to Delhi High Court ruling in Ericsson AB [TS-769-HC-2011(DEL)]. Delhi HC has taken a view that consideration for mere supply of software on a CD would not make it taxable as royalty, if none of the copyrights under the Copyright Act were transferred. Mumbai ITAT in Solid Works’ Corporation [TS-76-ITAT-2012(Mum)], followed the Delhi HC over the Karnataka HC, taking the view that when two views from different HCs were available, the view favourable to the assessee should be preferred. This ITAT decision has been followed in two other cases; by Pune ITAT in Allianz SE [TS-204-ITAT-2012(PUN)] and Mumbai ITAT in Sonata Information Tech [TS-286-ITAT-2012(Mum)]. Bangalore ITAT has not referred to any of these rulings.

Finance Act 2012, has retrospectively amended Sec 9(1)(vi) to provide that consideration for transfer of all or any right(s) for use or right to use a computer software (including granting of a licence) constitutes royalty, irrespective of the medium of transfer. ITAT has not referred to this amendment either.