Income Tax Appellate Tribunal - Bangalore
Arista Network Limited,Ireland vs Deputy Commissioner Of Income Tax, ... on 28 January, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH: BANGALORE
BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT
AND
SHRI SOUNDARARAJAN K., JUDICIAL MEMBER
IT(IT)A No.430/Bang/2025
Assessment year: 2022-23
Arista Networks Ltd., Vs. The Deputy Commissioner
70, Sir Rogersons Quay, of Income Tax,
Dublin, Ireland. (International Taxation),
PAN: AARCA 0999A Circle 1(1),
Bangalore.
APPELLANT RESPONDENT
Appellant by : Shri Suryanarayan, Sr. Advocate
Respondent by : Dr. Divya K J, CIT(DR)(ITAT), Bengaluru.
Date of hearing : 19.11.2025
Date of Pronouncement : 28.01.2026
ORDER
Per Prashant Maharishi, Vice President
1. This appeal is filed by Arista Networks Ltd. (the assessee/appellant) for the assessment year 2022-23 against the assessment order passed by the DCIT, Intl. Taxation, Circle 1(1), Bangalore dated 24.12.2024 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [the Act] wherein the total income of the assessee as per revised return of IT(IT)A No.430/Bang/2025 Page 2 of 16 Rs.7,03,81,860 was assessed at Rs.167,15,17,993 wherein the addition of Rs.160,11,36,133 was made pursuant to the directions of the ld. DRP-1, Bengaluru [DRP] dated 13.11.2024 wherein the total receipt of the assessee amounting to Rs.27,39,69,886 of software licences are of Rs.132,71,66,247 on sale of software goods are held to be fees for technical services and fees included services and therefore chargeable to tax in India.
2. The assessee is aggrieved with the same and is in appeal before us.
The assessee has challenged that the ld. AO and the ld. DRP has considered the above consideration to be in the nature of royalty under the I.T. Act and also royalty under the India-Ireland DTAA. The claim of the assessee is that the revenue is received from the sale of software licence and from off-shore supply of goods and is not in the nature of royalty. Further the software licence and sale of hardware products is a sale of copyrighted article and not copyright. Therefore this income is chargeable to tax as business income. It is also the claim of the assessee that assessee does not have a Permanent Establishment in India in terms of Article 5 of the DTAA and therefore the provision of Article 7 of the DTAA does not make anything chargeable to tax in India. The assessee also submitted that software licence and software embedded in the hardware are standardised and non-customisable software. Further the distributor or customer of the assessee does not have any right to copy or in any way tamper with the software or the source code and hence in view of the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private IT(IT)A No.430/Bang/2025 Page 3 of 16 Limited [TS-106-SC-2021] Engineering Analysis Centre of Excellence (P.) Ltd . vs. Commissioner of Income-tax [2021] 125 taxmann.com 42 (SC)/[2021] 281 Taxman 19 (SC)/[2021] 432 ITR 471 (SC)[02-03- 2021], it cannot be taxed as royalty. The assessee before the lower authorities heavily relied on the decision of the Hon'ble Supreme Court in 125 taxmann.com 42.
3. The ld. AO held that there is a confidentiality clause of the distributor agreement where it is stated that the foreign company can share the software source code, trade secrets, know-how, inventions and development plan, etc. and therefore there is a transfer of right to use of the patent and copyright. Thus, relying upon para 4.5 of the decision of the Hon'ble Supreme Court it was stated that because of the confidentiality clause the distributor agreement entered into by the assessee where there is existence of confidentiality clause is not covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis. Accordingly, the ld. AO. ter discussion concluded that though confidentiality clause may be precautionary, it is still providing the right to access the source code and other proprietary information which is an acquired right u/s. 14 of the Copyright Act. Thus, the above income falls into the definition of royalty under the I.T. Act as well as DTAA. The ld. AO further without prejudice stated that the assessee provides post-sales services apart from the actual sale of software which are technical services and falls in the definition of fees for technical services as per the I.T. Act and as per DTAA. Thus, the above amount was shown as an exempt amount by the assessee was IT(IT)A No.430/Bang/2025 Page 4 of 16 proposed to be taxed as royalty and fees for technical services at the beneficial rate of tax @ 10% of the DTAA. The ld. DRP also agreed with the ld. AO. Based on this, the final assessment order was passed on 24.12.2024 which is under challenge.
4. The ld. AR, Shri Suryanarayan, Sr. Advocate, submitted a paper book containing 226pages. He submitted that identical issue arose in the case of assessee for AY 2021-22 wherein the coordinate Bench in IT(IT)A No.1159/Bang/2023 vide order dated 23.6.2025 on identical facts and circumstances has dealt with the issue and decided that the above income is not chargeable to tax as royalty as per the I.T. Act and as per Article 12 of the DTAA. Thus, he submitted that the issue is squarely covered in favour of the assessee.
5. The ld. CIT(DR), Dr. Divya K J, vehemently supported the order of the ld. AO and submitted that the above sum is correctly charged as royalty or fees for technical services as per the I.T. Act as well as the DTAA.
6. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that the facts and circumstances of the case before us is identical to the facts and circumstances decided by the coordinate Bench in IT(IT)A No.1159/Bang/2023 for AY 2021-22 dated 23.6.2025 in the assessee's own case wherein in para 10 to 28 the Coordinate Bench has dealt with the issue as under: -
" 10. We have carefully considered the rival contentions and perused the orders of ld. lower authorities. The only issue involved in this IT(IT)A No.430/Bang/2025 Page 5 of 16 appeal is about the taxability of a sum of Rs.35,83,19,076 in the nature of royalty under the provisions of the Income-tax Act as well as the DTAA between India & Ireland.
11. Facts clearly show that assessee has earned 3 streams of income:-
(i) Software licence wherein software licences are sold by the assessee as standardised non-customisable without a right of copy, modify any portion of the software. The claim of the assessee is that the above sum would not qualify as royalty since the assessee is providing distribution with a right to distribute the software without providing any right in the copyright of the software and the issue is squarely covered in favour of assessee by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited.
(ii) The second stream of income is software embedded in the hardware wherein the software licences are embedded in switches. Therefore the software are embedded in a hardware and both these are inter-dependent and does not have a separate existence. Further the software embedded in the hardware is also a standardised software. Therefore the contention of the assessee is that what is being old is a combined product of switches embedded with software which does not have independent existence of switches or the software. Therefore it is a transaction of sale. In absence of any Permanent Establish (PE) of assessee in India, it cannot be taxed as business income. Further it is claimed that the issue is also covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) wherein it is held that there is a difference between the ownership of a physical item (switches) in which software is embedded and ownership of copyright.
Therefore it also does not become a royalty.
(iii) The 3rd revenue stream is that where the assessee replaces end users product with new product based on the requirement, assessee replaces those hardware which also have embedded software therein and therefore it is software embedded hardware only and not chargeable to tax. The reason of the assessee is similar to sale of software embedded in hardware. It was stated that sale of hardware does not qualify either as royalty or as fees for technical services. It is also pleaded that same is also not IT(IT)A No.430/Bang/2025 Page 6 of 16 chargeable to tax in India as it is sale of goods and there was no PE in India.
12. It is the claim of the assessee that income earned by the assessee is not in the nature of royalty as defined under Article 12 of the India-Ireland DTAA and Therefore same is not chargeable to tax in India.
13. The ld. AO examined the argument of the assessee and held that the software royalty revenue is not fitting into the 4 categories as decided by the Hon'ble Supreme Court. The AO was of the view that the access of source code amounts to royalty even under the OECD commentary on Article 12 relying on para 14.3of the Commentary. The ld. AO was also of the view that by getting access to the source code also gives information concerning industrial, commercial or scientific expertise and same is also royalty as per para 11.5 of the Commentary on Article 12. Thus by giving the source code, the logic, algorithm or programming language and technique are also shared and therefore it is royalty on account of supply of scientific, technical, industrial or commercial knowledge. Thus, there is royalty on account of copyright as well as royalty on account of scientific, technical, industrial or commercial knowledge. The ld. AO also referred to the End user licence agreement [ EULA] between the assessee and the customer. He referred to para 18 of the EULA regarding confidentiality and found that in the confidentiality clause it is clearly stated that the parent company can share software source code, trade secret, know-how, inventions, development, etc. and therefore there is transfer of right to use of the patents and copyrights. The ld. AO further referred to para 45 of the decision of the Hon'ble Supreme Court and held that it is clear from the confidentiality clause that the distributor agreement does fall into the ambit of the judgment of Hon'ble Supreme Court. Accordingly a show-cause notice was issued and same was replied.
14. The assessee gave submission that the decision of Hon'ble Supreme Court applies in all the 3 revenue segments stated above. The ld. AO considered the explanation of the assessee and held that confidentiality clause clearly provides that assessee can share the confidential information for the effective use of the software. He further held that confidentiality clause provides an opportunity IT(IT)A No.430/Bang/2025 Page 7 of 16 to the distributor to use all the proprietary information including the source code for the business purpose of the distributor. The ld. AO further admitted that this clause may be precautionary, but it is still providing a right to access the source code and other proprietary information. Therefore, this right is clearly a right u/s. 14 of the Copyright Act. The ld. AO further held that distributor is responsible for the correct installation and update of the software, therefore he is liable to provide the services in case of malfunction of the software and therefore he has an access to the proprietary information, thus this distinguishes the facts of the case compare to shrink wrapped software. The AO further examined the applicability of fees for technical services clause and held that maintenance and support services falls in the definition of fees for technical services as it also involves human intervention. He further held that there is no make available clause in the India-Ireland Treaty. He further stated that the claim of the assessee that as there is no human element involved in the provision of the services, but as the customer also can on his own install the hardware is self-contradictory situation. It is also the claim of the assessee that the ld. AO that there is a maintenance and support services which itself shows that human element is involved. Accordingly the AO held it to be taxable as royalty and charged 10% rate of tax thereon.
15. Before the ld DRP assessee furnished additional evidence and submitted the invoices of maintenance and support services which shows that switches embed with software are replaced which is considered as sale of goods and it does not involve any human intervention. Therefore, it does not satisfy criteria laid down for FTS as per DTAA. All other two streams are squarely covered by the decision of the Honourable supreme court in case of Engineering Analysis Services (Supra). The ld. DRP following its own direction for AY 2020. confirmed the action of the AO. We have carefully pursued the direction of the ld DRP for AY 2020- 21 . Assessee has also filed appeal for AY 2020-21 before ITAT, however, hearing for the same is not conducted by the Ld. DR for the reason that one of the grounds raised by the assessee in appeal of that year is related to orders/ directions passed without DIN.
16. Honorable Supreme court in Engineering Analysis Center of excellence ( P ) Ltd v CIT 125 taxmann.com 42 (sc) Neutral IT(IT)A No.430/Bang/2025 Page 8 of 16 Citation: 2021 INSC 137 [MANU/SC/0137/2021] has considered the provision of the Copyright Act ,1957 and has held as under :-
"34. A reading of the aforesaid provisions leads to the following conclusions. Under Section 2(o) of the Copyright Act, a literary work includes a computer programme and a computer programme has been defined Under Section 2(ffc) of the Copyright Act to mean a set of instructions expressed in words, codes, schemes or in any other form capable of causing a computer to perform a particular task or achieve a particular result.
35. Though the expression "copyright" has not been defined separately in the "definitions" Section of the Copyright Act, yet, Section 14 makes it clear that "copyright" means the "exclusive right", subject to the provisions of the Act, to do or authorise the doing of certain acts "in respect of a work". When an "author" in relation to a "literary work" which includes a "computer programme", creates such work, such author has the exclusive right, subject to the provisions of the Copyright Act, to do or authorise the doing of several acts in respect of such work or any substantial part thereof. In the case of a computer programme, Section 14(b) specifically speaks of two sets of acts - the seven acts enumerated in Sub-clause (a) and the eighth act of selling or giving on commercial rental or offering for sale or for commercial rental any copy of the computer programme. Insofar as the seven acts that are set out in Sub-clause (a) are concerned, they all delineate how the exclusive right that is with the owner of the copyright may be parted with, i.e., if there is any parting with the right to reproduce the work in any material form; the right to issue copies of the work to the public, not being copies already in circulation; the right to perform the work in public or communicate it to the public; the right to make any cinematograph film or sound recording in respect of the work; the right to make any translation of the work; the right to make any adaptation of the work; or the right to do any of the specified acts in relation to a translation or an adaptation.
36. In essence, such right is referred to as copyright, and includes the right to reproduce the work in any material form, issue copies of the work to the public, perform the work in public, or make translations or adaptations of the work. This is made even clearer by the definition of an "infringing copy" contained in Section IT(IT)A No.430/Bang/2025 Page 9 of 16 2(m) of the Copyright Act, which in relation to a computer programme, i.e., a literary work, means reproduction of the said work. Thus, the right to reproduce a computer programme and exploit the reproduction by way of sale, transfer, license etc. is at the heart of the said exclusive right.
37. Section 14(b)(ii) of the Copyright Act was amended twice, first in 1994 and then again in 1999, with effect from 15.01.2000. Prior to the 1999 Amendment, Section 14(b)(ii) of the Copyright Act read as follows:
(ii) to sell or give on hire, or offer for sale or hire any copy of the computer programme, regardless of whether such copy has been sold or given on hire on earlier occasions;
What is conspicuous by its absence is the phrase "regardless of whether such copy has been sold or given on hire on earlier occasions".
38. Importantly, no copyright exists in India outside the provisions of the Copyright Act or any other special law for the time being in force, vide Section 16 of the Copyright Act. When the owner of copyright in a literary work assigns wholly or in part, all or any of the rights contained in Section 14(a) and (b) of the Copyright Act, in the said work for a consideration, the assignee of such right becomes entitled to all such rights comprised in the copyright that is assigned, and shall be treated as the owner of the copyright of what is assigned to him (see Section 18(2) read with Section 19(3) of the Copyright Act). Also, Under Section 30 of the Copyright Act, the owner of the copyright in any literary work may grant any interest in any right mentioned in Section 14(a) of the Copyright Act by licence in writing by him to the licensee, under which, for parting with such interest, royalty may become payable (see Section 30A of the Copyright Act). When such licence is granted, copyright is infringed when any use, relatable to the said interest/right that is licensed, is contrary to the conditions of the licence so granted. Infringement of copyright takes place when a person "makes for sale or hire or sells or lets for hire" or "offers for sale or hire" or "distributes...so as to affect prejudicially the owner of the copyright", vide Section 51(b) of the Copyright Act. Importantly, the making of copies or adaptation of a computer programme in order to utilise the said computer programme for IT(IT)A No.430/Bang/2025 Page 10 of 16 the purpose for which it was supplied, or to make up back-up copies as a temporary protection against loss, destruction or damage so as to be able to utilise the computer programme for the purpose for which it was supplied, does not constitute an act of infringement of copyright Under Section 52(1)(aa) of the Copyright Act. In short, what is referred to in Section 52(1)(aa) of the Copyright Act would not amount to reproduction so as to amount to an infringement of copyright.
39. Section 52(1)(ad) is independent of Section 52(1)(aa) of the Copyright Act, and states that the making of copies of a computer programme from a personally legally obtained copy for non- commercial personal use would not amount to an infringement of copyright. However, it is not possible to deduce from this what is sought to be deduced by the learned Additional Solicitor General, namely, that if personally legally obtained copies of a computer programme are to be exploited for commercial use, it would necessarily amount to an infringement of copyright. Section 52(1)(ad) of the Copyright Act cannot be read to negate the effect of Section 52(1)(aa), since it deals with a subject matter that is separate and distinct from that contained in Section 52(1)(aa) of the Copyright Act."
17. Honourable Supreme Court in para no. 40 was also concerned with DTAA between India and Ireland, which is also the case before us. The DTAA defines royalty and FTS as under :-
3. ( a) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph film or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft, or for information concerning industrial, commercial or scientific experience;
(b) The term "fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include IT(IT)A No.430/Bang/2025 Page 11 of 16 payments for services mentioned in Articles 14 and 15 of this Convention.
18. Honourable SC also considered in para no. 45 to 47 the distribution agreement involved in case before it , which are also similar to agreement before us, as under :-
"45. A reading of the aforesaid distribution agreement would show that what is granted to the distributor is only a non- exclusive, non-transferable licence to resell computer software, it being expressly stipulated that no copyright in the computer programme is transferred either to the distributor or to the ultimate end-user. This is further amplified by stating that apart from a right to use the computer programme by the end-user himself, there is no further right to sub-license or transfer, nor is there any right to reverse-engineer, modify, reproduce in any manner otherwise than permitted by the licence to the end-user. What is paid by way of consideration, therefore, by the distributor in India to the foreign, non-resident manufacturer or supplier, is the price of the computer programme as goods, either in a medium which stores the software or in a medium by which software is embedded in hardware, which may be then further resold by the distributor to the end-user in India, the distributor making a profit on such resale. Importantly, the distributor does not get the right to use the product at all.
46. When it comes to an end-user who is directly sold the computer programme, such end-user can only use it by installing it in the computer hardware owned by the end-user and cannot in any manner reproduce the same for sale or transfer, contrary to the terms imposed by the EULA.
47. In all these cases, the "licence" that is granted vide the EULA, is not a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in Sections 14(a) and 14(b) of the Copyright Act, but is a "licence"
which imposes restrictions or conditions for the use of computer software. Thus, it cannot be said that any of the EULAs that we are concerned with are referable to Section 30 of the Copyright Act, inasmuch as Section 30 of the Copyright Act speaks of IT(IT)A No.430/Bang/2025 Page 12 of 16 granting an interest in any of the rights mentioned in Sections 14(a) and 14(b) of the Copyright Act. The EULAs in all the appeals before us do not grant any such right or interest, least of all, a right or interest to reproduce the computer software. In point of fact, such reproduction is expressly interdicted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of licence or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each book. Importantly, there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of the same. On the other hand, if an English publisher were to sell the same book to an Indian publisher, this time with the right to reproduce and make copies of the aforesaid book with the permission of the author, it can be said that copyright in the book has been transferred by way of licence or otherwise, and what the Indian publisher will pay for, is the right to reproduce the book, which can then be characterised as royalty for the exclusive right to reproduce the book in the territory mentioned by the licence."
19. On considering the agreement with the distributors and reading clause 3.1, it is provided that assessee grants distributor a limited, non-exclusive, non-transferable, revocable right to receive from assessee and to sub-licence the resale of software in object code form only subject to terms of end user licence agreement. In clause 3.3 it also provides that the distributor will not copy, duplicate, translate, reverse engineer, decompile or disassemble the software or attempt to discover any source code or underlying algorithms of the software by any means. It further provides that the distributor will inform the assessee any unauthorised activity by the third party in the territory of the distributor. Thus from the above, it is clear that it is only in the object code form licence to use the software is provided. Thus there is no evidence that assessee also provides source code to the end user or to the distributor. Thus, the observation of the ld. AO is devoid of any merit that assessee has or will part with the source code to the distributor or to end users.
IT(IT)A No.430/Bang/2025 Page 13 of 16
20. Further with respect to the software embedded in hardware, the Hon'ble Supreme Court has also confirmed the decision of the Hon'ble Delhi High Court in 344 ITR 470 that software which is embedded in the hardware is a transaction of sale and not a royalty. Further admittedly there is no allegation that assessee has any PE in India. Therefore, the income earned from this stream is not chargeable to tax and covered in favour of the assessee by the decision of Hon'ble Supreme Court.
21. Coming to the confidentiality clause in the agreement, it provides that during the course of business, if the distributor or other party obtains information about the confidential or proprietary nature, it shall maintain it with strict confidence and trust and should be disclosed only to employees on need to know basis and not to disclose to any other person. On looking at this confidentiality clause, it neither speaks of giving any right to the distributor or to the other party, but it preserves and protects its own right. Therefore the confidentiality clause does not provide for exceeding access to any other information including for the software, it preserves and protects right of the assessee, if accidentally it comes into the hands of the distributors or others. Thus, it does not help the case of the AO to charge the above sum as royalty. Confidentiality clause in fact protects the right of Copyright owner and does not give any further right to the user/ distributor.
22. The ld. CIT(DR) in her written submissions states that the case of the assessee is not covered by the decision of Hon'ble Supreme Court as the revenue streams of the assessee does not fall into any of the 4 categories of the cases on which the Hon'ble Supreme Court has given its decision. Therefore the reliance placed by the assessee on this decision is not correct. Regarding the applicability of the decision of the Hon'ble Supreme court, the facts show that assessee is original equipment manufacturer and manufactures network based solutions such as switches, routers, etc. These products are available with limited features and functionality, without installing any additional software licences and are being sold to the Indian customers through third party channel partners. The assessee provides software licences and can also be purchased separately on need basis. These software are licenced products are standard in nature and the customers do IT(IT)A No.430/Bang/2025 Page 14 of 16 not have any right and option to modify customised software licences. Further the distributors are not permitted to copy or modify the software. This is evident in clause 3 of the distributors resale rights of the agreement. The distributor agreement has also the licence restrictions and conditions by which the copy, etc. is strictly prohibited. Thus the assessee is providing distributors a right to distribute software without providing any right in the Copyright of the software. The distributors are also given non- exclusive non-transferable licence to resell the software products and was not permitted to copy, modify the software, reverse compile, reverse assemble any portion of the software. Further the confidentiality clause also do not provide any right in the Copyright of the software to the distributors and end users, but facilitates protection of the right of the assessee. Similarly, the assessee also provides the hardware products which are preloaded with software licences, which is also sale of software embedded in the hardware component.
23. Both the above streams are covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra) .
24. With respect to the hardware replacement and support services treated by the ld. AO as fees for technical services wherein assessee replaces the damaged faulty hardware products with new product and therefore it is hardware replacement and support services where assessee provides only hardware product. This is also evident from the invoices wherein it is mentioned as hardware replacement and corresponding quantities. Therefore, it is not fees for technical services, but it is sale of embedded software in the hardware product. Therefore the same cannot be considered as fees for technical services.
25. We have also been shown the decision of Honourable supreme court in case of Microsoft Regional Sales Pte Limited [2024] 167 taxmann.com 45 (SC)/ [2024] 301 Taxman 402 (SC) where in assessment years involved is Assessment years 2010-11 to 2017- 18 [ post amendment] where in on merit also honourable supreme court has held that: -
"3. Even otherwise, the special leave petition is covered on merits by virtue of the judgment of this Court in the case Engineering IT(IT)A No.430/Bang/2025 Page 15 of 16 Analysis centre of Excellence Private Limited v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471/(2022) 3 SCC 321 , which judgment has also been sustained in the review petition filed by the petitioner by a three-Judge Bench of this Court."
26. We have also been shown the decision of Honourable supreme court in case of MOL Corporation [2024] 162 taxmann.com 198 (SC)/ [2024] 299 Taxman 506 (SC) [2024] 167 taxmann.com 45 (SC)/ [2024] 301 Taxman 402 (SC) where in assessment years involved is Assessment years 2013-14 [ post amendment] where in on merit also honourable supreme court has held that: -
"3. In the circumstances, following the earlier order dated 11.03.2024 passed in CIT (International Taxation) v. Mol Corporation [SLP (C) Diary No(s). 5669 of 2024], we condone the delay and dismiss the special leave petitions on the basis of the earlier judgment of this Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471 (SC)/[2022] 3 SCC 321 and by following order dated 11.03.2024 passed in the aforementioned special leave petition."
27. Thus, according to us, in view of the decision of honourable supreme court, even post amendment, we hold that income earned by the assessee of Rs 35,83,19,076/- comprising of Sale of Software products as Software license of Rs. 94031793/-, Sale of Software embedded in hardware of Rs 33058672/- and hardware replacement and support services also in the nature of software embedded in hardware of Rs. 22,53,36,904/- is not 'royalty' within the meaning of Article 12 of India Ireland DTAA.
28. In view of the above facts, ground Nos.3 to 11 of the appeal are allowed and appeal of assessee is partly allowed."
7. The ld. DR could not show that why the above decision should not be applied and binds us. The above decision of the Coordinate Bench is also following the decision of the Hon'ble Supreme Court in the case of Engineering Analysis several other decisions of various high courts.
IT(IT)A No.430/Bang/2025 Page 16 of 16 In the absence of any distinction, we have no hesitation in following that order.
8. In view of the above, respectfully following the decision of the Coordinate Bench in assessee's own case for the immediately preceding year, we hold that the above sum of Rs.160 crores is neither chargeable to tax as royalty as per the I.T. Act nor as per DTAA.
9. In the result, the appeal filed by the assessee is allowed.
Pronounced in the open court on this 28th day of January, 2026.
Sd/- Sd/-
(SOUNDARARAJAN K.) (PRASHANT MAHARISHI)
JUDICIAL MEMBER VICE PRESIDENT
Bangalore,
Dated, the 28th January 2026.
/Desai S Murthy /
Copy to:
1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A)
5. DR, ITAT, Bangalore.
By order
Assistant Registrar
ITAT, Bangalore.