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2022 (10) TMI 654 - AT - Income TaxIncome deemed to accrue or arise in India - Royalty receipt - Implementation of SAP for transportation system at Pune India- Singapore DTAA - Fee for Technical Services - TDS u/s 195 - CIT(A) held that the services mentioned above fall under the category of Article 12(4)(a) as they are ancillary and subsidiary to consideration for Royalty. The ld. CIT(A) also held that the taxability is determined by nature of service only and since there was no PE they have to be taxed on gross basis - HELD THAT:- The quarrel/is squarely covered in favour of the assessee and against the Revenue by the decision of 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] amounts paid by resident Indian end-users/distributors to nonresident computer s. manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the pay of royalty for the use of copyright in the computer software, and that same does not give rise to any income taxable in India, as a result of the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. - Hence, we hold that the appeal of the assessee on the ground of "Royalty" is allowed. Provisions of FTS - "make available" clause - We find the similar matter has been adjudicated by the Co-ordinate Bench of ITAT Mumbai in the case of SCA Hygiene Products AB Vs. DCIT [2021 (1) TMI 323 - ITAT MUMBAI] held that the payment received by the assessee has been held to be in the nature of reimbursement, which is outside the ambit of taxation. The person selling the SAP software is Be One Solution, Switzerland, whereas the person providing the services in question is the assessee. Article 12(4)(a) will not, therefore, come into play at all. In our considered view, therefore, the taxation under article 12 in the present case can come into play only when the "make available" clause is satisfied, but then the Assessing Officer's justification for the satisfaction of 'make available' clause, for the detailed reasons set out earlier in this paragraph, does not meet our judicial approval. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee on this point as well. Accordingly, we hold that the income on account of Information Technology Services is also not taxable under article 12 - Decided in favour of assessee.
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