Oracle Systems Corporation Vs. The A.D.I.T

Parties Involved

Facts Summary

The assessee, Oracle Systems Corporation, incorporated in the USA, has a wholly owned subsidiary in India, Oracle India Private Limited (OIPL). OIPL has two divisions: Software Distribution Division and Software Development Support Division. Oracle Corp grants OIPL the right to duplicate and license Oracle software under a Software Duplication and Distribution License Agreement (SDDLA). OIPL sub-licenses the duplicated software to customers in India for a consideration, paying royalty to Oracle Corp. Apart from this, there are instances where licenses are granted by Oracle Corporation's associate concerns outside India, and software is used in India by associated concerns of MNCs. The revenues from such activities are termed as revenue transfers from Global Deals to OIPL under a Software Support Services Agreement (SSSA). OIPL includes these receipts as revenue and offers tax on its profits but pays no royalty to Oracle Corp on these receipts. The Assessing Officer (AO) considered 30% of such revenue transfers as royalty and taxed it at 15%. The Commissioner of Income Tax (Appeals) (CIT(A)) enhanced this amount to 100% of the revenue transfers received by OIPL. Aggrieved by this order, Oracle Corp is in appeal before the Tribunal. The key issues under appeal pertain to the Permanent Establishment (PE) of Oracle Corp in India and the taxation of royalty on global deals.…

Legal Issues

• 1. Whether Oracle Corp has a Permanent Establishment (PE) in India.
• 2. Whether the revenue transfers from Global Deals should be considered as royalty payable to Oracle Corp.

Judgment Outcome

Decided in favour of Revenue.

Precedents Relied Upon

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