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2022 (2) TMI 920 - ITAT DELHIAddition as Fees for Included Services [FIS] - appellant is a company incorporated under the laws of the United States of America and is engaged in the business of providing design and development services and engineering services of vehicle safety systems - HELD THAT:- Technical knowledge or skills provided by the assessee should be imparted to and absorbed by the receiver Autoliv India Pvt. Ltd so that the receiver can deploy similar technology or technique in future without depending upon the assessee. Technology only will be considered as made available when the person acquiring such knowledge is possessed of the same enabling him to apply in future at his own. If the services are consumed in the provision without leaving anything tangible with the payer for use in future, then it will not be characterized as ‘making available’ of the technical services notwithstanding the fact that its benefit flowed directly and solely to the payer of the service - What is necessary is that the service provider should transmit the technical knowledge to the payer so that the payer makes use such technology in future without involvement of the service provider. Considering the facts in totality in light of the relevant article of India – US DTAA, we are of the considered view that the engineering fees received by the assessee are not taxable in India. Ground No. 2 with all its sub-grounds is allowed. Taxation of software reimbursements as Royalty - assessee strongly contends that reimbursements sought by the assessee represent recovery of expenses incurred by it, on behalf of Autoliv India, on an ‘at-cost’ basis - HELD THAT:- Reimbursement towards software charges will not qualify as royalty u/s 9(1)(vi) of the Act as well as under DTAA for the simple reason that it is not a case of the assessee possessing any right for use or right to use computer software in the first place for it to transfer such right to Autoliv. Article 12(3A) of the India – USA DTAA provides royalty which means consideration received inter alia for use or right to use any copyright of a literary, artistic or scientific work. We are of the considered view that the assessee has not received consideration for granting a right to use any copyright in computer software from Autoliv. We find that the lower authorities have heavily relied upon the amendment brought in the statute in 2012. But the facts of the case in hand are squarely covered in favour of the assessee and against the Revenue by the Hon'ble Supreme Court in a land mark judgment in the case of Engineering Analysis Center of Excellence Pvt Ltd [2021 (3) TMI 138 - SUPREME COURT] Since the term ‘Royalty’ has been defined in the DTAA, definition of the term ‘Royalty’ under the Act cannot be applied. Considering the facts of the case in totality, we hold that reimbursement towards software charges received by the assessee from Autoliv is not taxable since the same does not represent any income in the hands of the assessee and further, in light the decision of the Hon'ble Supreme Court, in the case of Engineering Analysis Centre of Excellence Pvt Ltd [supra], reimbursement towards software charges are not taxable as royalty as well. We, accordingly, direct the Assessing Officer to delete the impugned addition. Ground No. 3, with all its sub grounds is allowed.
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