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2018 (5) TMI 1861 - AT - Income TaxTaxability of license fee as Royalty - license fee from RBI in respect of software EB Guide Studio - Income deemed to accrue or arise in India - whether the licensed product/s developed by using the assessee’s software EB Guide Studio is a derivative program, or not? - HELD THAT:- The parties have in the instant case themselves regarded the consideration (license fee) as royalty, implying a grant of right to use the Intellectual Property Rights (IPRs) embedded in the software inasmuch as it gets transmitted/embodied in the licensed products, with the user (RBI) being invoiced on the basis of the licensed products supplied. The decision in Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT], rather, on facts, supports the case of the Revenue. The license fee from RBI in respect of software EB Guide Studio earned by the assessee, in our view, in view of the fore-going, qualifies to be royalty. We have as yet considered only the said license fee there-from, from RBI. As regards the software licensed to TCSL, we do not find any specific agreement on record, nor was the same referred to during hearing. In fact, no specific arguments were advanced by the parties in relation thereto. We are therefore unable to issue any definite findings with regard to the license fee from TCSL. The matter therefore shall accordingly have to travel back to the file of the AO for a decision on merits consistent and in accordance with the findings/observations made herein, of-course after allowing the assessee a reasonable opportunity to state its case in the matter. We may though clarify that if the development agreement on record is also applicable to TCSL our findings would be equally applicable to the license fee from TCSL as well. AO shall proceed accordingly. We decide accordingly. Applicability of Education cess on DTAA rate - charged Education cess over and above the tax rate stipulated in the Indo-German DTAA, on the royalty income - HELD THAT:- ‘Education cess’ is only a ‘surcharge’ is clarified by the relevant Finance Act itself. Further, that surcharge is only a tax, stands clarified by the Apex Court in CIT v. K. Srinivasan [1971 (11) TMI 2 - SUPREME COURT]. We, accordingly, have no hesitation in, accepting the assessee’s plea, directing the non-imposition of the ‘education cess’ or any other ‘surcharge’, so that the tax rate per the DTAA only shall apply. See THE BOC GROUP LIMITED [2016 (1) TMI 414 - ITAT KOLKATA]- We decide accordingly.
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