The Indian Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 19 December 2008 in the case of Infrasoft Ltd. v. ADIT (International Tax) (ITA No. 847/Del/2008) on whether payments for customized software should be taxed as "royalty" or "business profits".
(a) Facts. The Taxpayer (i.e. Infrasoft Ltd.) was a marketing and development company incorporated in the United Kingdom with a branch/permanent establishment (henceforth, "the Branch") in India. Th…