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2021 (2) TMI 508 - AT - Income TaxIncome accrued in India - Taxability as Royalty income - sale to Resellers - assessee earned revenue from sale of software licenses in India including certification and software for authentication business which was claimed as not chargeable to tax in the absence of it having any Permanent Establishment (PE) in India - AO show caused the assessee as to why the receipts from sale of software licenses should not be taxed as Royalty - India and USA DTAA - HELD THAT:- assessee has entered into agreements with Resellers for establishing contact with the end customers and make sales. Resellers are obliged to purchase the Symantec Products from the assessee for resale. A Reseller simply gets a user name and password for accessing to the Reseller Console of the assessee just for the purpose of purchasing Symantec Products and then for further sale to the customers. Price per product is already settled at which the Symantec products will be available to the Resellers. Price to be charged by the Reseller from customers is to be decided by him without the assessee’s involvement. Right in the intellectual property of the computer software remains with the assessee at all times. Thus it is abundantly clear that it is not a case as projected on behalf of the Revenue that the Resellers have been given a license by the assessee for consideration to commercially exploit such license at their end. Resellers have not been conferred with any right to copy the software for further sale by them. They just purchase the Symantec Products as such for resale to the end customers in India. Each item of Symantec product is to be separately purchased by them for resale. The position would have been otherwise, if the assessee, instead of selling Symantec Products to the Resellers, would have licensed them the right to copy it for their commercial exploitation, which would have merited consideration of the matter from a different perspective. In our considered opinion, the position qua the sale to Resellers is no different from the direct sales made by the assessee to its end customers in India. Thus the essential ingredient of the Royalty, being, granting of use or right to use the copyright is lacking insofar as sale to Resellers is concerned. It is not as if the Distributors or the Resellers acquire any right from the assessee to copy the software and then exploit it commercially. Their transactions are confined to purchasing specific Symantec Products from the assessee and then eventually selling the same to the end customers in India. There is no qualitative difference between the direct sales made by the assessee to its customers in India, which have already passed the scrutiny by the Tribunal in assessee’s own case for earlier year and the sales made by the assessee through the Distributors or the Resellers. In both the sets of circumstances, it is only one-to-one sale of the Symantec Products by the assessee and at no stage the right to use the copyright in the software is licensed either to the Distributor or the Reseller. Thus, the decision taken by the Tribunal in the context of direct sales made by the assessee to end customers in India applies with full force insofar as the sales through Distributors and Resellers are concerned. That being the position, we hold that the income earned by the assessee from sale of software, either directly to the customers in India or through Distributors or Resellers constitutes its business income and not the Royalty income. As admittedly the assessee did not have any Permanent Establishment in India, such income will not magnetize Indian taxation. - Decided in favour of assessee.
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