Distributor should pay tax on software procured from company outside India: Bengaluru ITAT

Mumbai: A Bengaluru bench of the Income Tax Appellate Tribunal ruled that tax is applicable on payment made by distributor for getting software from a foreign company.

As per the details of the case, an Indian arm of a Jersey based company was responsible for software distribution in India, conducting events and other advertising expenses. The Indian entity charged 15% margin over the cost incurred.

The tax department said that that the tax should not just be paid on the margins.

The ITAT noted that the main issue in dispute was whether the sum debited to the profit and loss account by the taxpayer as software expenses was purchase of software or mere reimbursement by the taxpayer to the foreign entity