Bundled license fees for standard software along with implementation service not taxable as royalty under India–Ireland DTAA – Delhi bench of the Tribunal

In brief

The Delhi bench of the Income-tax Appellate Tribunal (Tribunal)¹ ruled that payments received by the taxpayer, an Irish company, from its Indian customer for licensing standard software and related services do not constitute ‘royalty’ under Article 12(3) of the India-Ireland Double Taxation Avoidance Agreement (DTAA). The Tribunal found that the software provided was standard, not tailor-made and that no copyright or intellectual property rights (IPRs) were transferred to the Indian customer. Consequently, the Tribunal deleted the addition made by the Tax Officer (TO), holding that such payments are not taxable as royalty in India.