ITAT Rules Software Receipts Not Taxable as Fee for Technical Services under India-US DTAA:

ITAT holds that Rs. 5.89 crore receipts for software reseller licences are not taxable as fee for technical services or royalty; exempts income under India-US DTAA.

Tribunal holds that receipts of Rs. 5,89,73,412 from software reseller agreements constitute sale of copyrighted articles

Meetu Kumari

Oct 28, 2025

Last update on Oct 28, 2025

ITAT Rules Software Receipts Not Taxable as Fee for Technical Services under India-US DTAA The assessee, a foreign company having business operations in certificate authentication and digital security services, presented its appeal against the order of assessment dated 13.12.2024 issued under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, as per the directions dated 26.11.2024 of the Dispute Resolution Panel. The leading point in dispute pertained to the assessability of receipts of Rs. 5,89,73,412, which the AO has taken on record as Fee for Technical Services (FTS). The parties consented before the Bench that the point was finalised by the Tribunal's order in the assessee's own case for the Assessment Year 2021-22, dated 14.11.2024, with regard to identical agreements and facts. The AO, however, had considered such receipts as taxable FTS on the rationale that they were inseparable from technical support and digital service delivery. Issue Raised: Whether receipts of Rs. 5,89,73,412 received by the assessee from Indian customers under reseller and software licence agreements could be taxed in India as Fee for Technical Services (FTS) under Section 9(1)(vii) of the Act and Article 12 of the India-US DTAA. ITAT’s Decision: The Tribunal examined the contractual clauses and found that the assessee had issued non-exclusive and non-transferable licences without transferring any right to modify or exploit the software source code. It was observed that these arrangements did not amount to the granting of any copyright, nor did they “make available” any technical knowledge or process to the Indian resellers. Relying on the Tribunal’s decision in the assessee’s preceding year and on the Supreme Court’s judgment in Engineering Analysis Centre of Excellence Pvt. Ltd., it considered that these transactions are the sale of copyrighted articles and can never be considered as royalty or FTS either under the domestic law or the Treaty. The Tribunal also observed that receipts from a single customer, with an independent technical-support clause, totalled only Rs. 1,20,931 and cannot warrant treating the whole consideration as FTS. Thus, the insertion of Rs. 5,89,73,412 was to be struck down, exempting the receipts from tax under both the Act and the India-US DTAA. Thus, reasons for interest under Section 234B and the initiation of penalty under Section 274, read with Section 270A, were made insignificant. The appeal was thus partly allowed. To Read Full Judgment, Download PDF Given Below

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Meetu Kumari

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Meetu Kumari is an Experienced Advocate and Content Writer with 4+ years of demonstrated history of working in the law practice industry. Skilled in Developing Content, Researching, and Drafting. Strong professional with a Bachelor of Science (B.Sc.) focused on Law from Gujarat National Law University.