2017 (8) TMI 906 - AT - Service Tax

Intellectual Property Rights Service - royalty - Held that - it can be seen that the Intellectual Property Right should be under the law enforced in India. As per the facts of the present case, since the Intellectual Property Right which is used by the appellant belong to the foreign person and that Intellectual Property Right is not governed by any law in India, therefore it does not cover under the definition of Intellectual Property Right. Accordingly, the same is not taxable - appeal allowed decided in favor of appellant.

Summary

Issues:
Demand of service tax on Intellectual Property Rights received from abroad under reverse charge mechanism.

Analysis:
The appellant was subjected to a demand of service tax under the head of Intellectual Property Rights received from abroad under the reverse charge mechanism. The appellant argued that the service tax on Intellectual Property Rights was levied from a later date than the period involved in the case as per the agreement of royalty. The appellant contended that since the service was provided by a foreign person not registered in India, the Intellectual Property Right should be governed by Indian law to be taxable. Referring to the definition of Intellectual Property Right under Section 65(55a), the Tribunal noted that the Intellectual Property Right should be under the law enforced in India. As the Intellectual Property Right in question belonged to a foreign entity not governed by Indian law, it did not fall under the definition of Intellectual Property Right, making it non-taxable. The Tribunal cited a previous decision in Reliance Inds. Ltd., which supported the appellant's argument.

The respondent, representing the revenue, reiterated the findings in the impugned order. After considering the submissions from both sides, the Tribunal found that the royalty paid by the appellant for the Intellectual Property Right owned by a foreign company not registered under Indian law was not taxable. The Tribunal concluded that the service of the Intellectual Property Right in question did not fall under the definition of Intellectual Property Right service as per the Finance Act, 1994. Therefore, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant. The decision was pronounced in court on 10/07/2017.