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2024 (5) TMI 160 - ITAT DELHIIncome deemed to accrue or arise in India - FTS/FIS - receipts pertaining to supply of software (including AMC services) - DR held software licence fee will not constitute royalty income but business income under Article 7 of India- USA DTAA which is not taxable in India in the absence of PE of the assessee. HELD THAT:- Assessee is a tax resident of USA and has opted to be governed by the provisions of India-USA DTAA. Also, the assessee does not have a PE in India. The assessee had entered into a Software Licensing Agreement for supply and license certain Software and Service Level Agreement (forming part of Software Licence Agreement) to provide AMC services to Reliance/Jio/ RJIL. What the assessee has supplied in the form of a Software to Reliance/ Jio is a copyrighted article not a copyright in the Software. Fact on record demonstrates that the Software is supplied by the assessee on a non-transferable, non-exclusive basis to various customers all over India. The assessee has only granted a right to use its Software to Jio in connection with its telecommunication business. The consideration received towards licensing of software is for use of a copyrighted article and therefore not taxable as royalty income under the provisions of Article 12 of the India-USA DTAA. In our considered view, the case of the assessee is squarely covered by the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (2021 (3) TMI 138 - SUPREME COURT]) which has already been upheld by the DRP and the Hon’ble Delhi High Court in light of the factual matrix of the present case. We, therefore have no reason to interfere with the findings of the Ld. DRP on the impugned issue. Consequently, consideration received by the assessee from supply of software licence is not taxable in India in terms of Article 7 of the India-USA DTAA. Accordingly, ground Nos. 1 to 4 is allowed with a direction to the Ld. AO to give effect to the Ld. DRP’s findings in its directions/ order. Remaining receipts on account of support and maintenance services rendered by the assessee - Nothing has been brought on record by the Revenue to establish that any technical knowledge has been provided to the employees of Reliance / JIO and / or human intervention is required in provision of AMC services. The observations and findings of the AO/ DRP on these aspects are based on surmises and conjectures. Imparting training or educating a person with respect to functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA which view has been upheld by the Hon’ble Delhi High Court’s decision in the case SFDC Ireland vs. CIT [2024 (3) TMI 620 - DELHI HIGH COURT]. We hold that the receipts are not taxable in India as FTS/ FIS under Article 12(4) of the India-USA DTAA. It is business profits of the assessee not taxable in India in the absence of a PE of the assessee in India in terms of Article 7 of the India-USA DTAA. Accordingly, ground decided in favour of the assessee. In the nutshell, the entire receipts from the supply of software licence and maintenance and support services (AMC services) rendered by the assessee are held to be non-taxable in India. Appeal of the assessee is allowed.
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