The case ITA No. 244/DEL/2021 involves SDL Multi-Lingual Solutions (Singapore) Pte Ltd, a company based in Singapore, appealing against the Indian tax authorities’ decision regarding income from software licenses.
SDL Multi-Lingual Solutions licensed software to Reliance Jio Infocomm Ltd under agreements that were considered by the tax authorities to involve royalties, thereby taxable in India under the India-Singapore treaty.
The primary dispute was whether the payments received by SDL Multi-Lingual Solutions should be considered royalties or business profits. The case referenced the ruling in Engineering Analysis Centre Excellence Pvt. Ltd Vs. CIT, which has significant implications for similar cases.
The Income Tax Appellate Tribunal, citing precedents and treaty interpretations, decided in favor of SDL Multi-Lingual Solutions, stating that the income should be treated as business profits, not taxable in India in the absence of a permanent establishment.
This decision is significant as it clarifies the taxation of software payments under international tax laws and treaties, particularly between India and Singapore, impacting how multinational companies structure their software licensing and sales operations.
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