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2022 (1) TMI 92 - AT - Income TaxChargeability as 'Fees for technical services’ - test of ‘make available’ - HELD THAT:- The technical knowledge, experience, skill etc. should not get exhausted in the service itself. Something should be provided in such a manner that the receiver may use it after its receipt. If certain technical or consultancy services etc. are provided by one, which get exhausted in the process of providing such services, they do not ‘make available’ any technical knowledge, experience, skill etc., to the other. Extantly, we are confronted with a situation in which the assessee provided technical or consultancy services through its two employees which were consumed in the provision of services itself and nothing was ‘made available’ to TTL or TML for afterwards use. The PVR clearly refers to certain deliverables by TTL to TTM, such as, Vehicle Configuration (VC) with all necessary components required to construct the full VC for the X101Aa (Vista FL LHD and FL LHD NCAP 3 star) VTS and Manufacturing Feasibility Considerations, which refer to making available the requisite design or engineering to TML. Unlike TTL, there is no reference to any deliverables in the PVR by the assessee either to TTL or TML, which further fortifies that services rendered by the assessee are albeit in realm of technical services but are not made available to anyone. Whereas the provision of Engineering and Design services by TTL to TML satisfy the test of ‘make available’, the provision of services by the assessee to TTL fall short of the same and hence they do not fall within the definition of `Fees for included services’ under Article 12(4) of the DTAA. Going with the mandate of section 90(2) of the Act, it is the definition of `Fees for Included services’ under the DTAA which would prevail over the definition of `Fees for technical services’ u/s.9(1)(vii) of the Act. Since the assessee did not receive any Fees for Included services under Article 12(4) of the DTAA to TTL, the sum of ₹ 52.73 lakh, can’t be charged to tax as Fees for Technical services. We have observed above that the assessee categorically stated before the AO that it did not have any Permanent Establishment in India, which point has not been controverted by the Officer. In the absence of the assessee having any PE in India as per Article 5 of the DTAA, the amount received from TTL cannot be considered as Business profits in terms of Article 7. We, therefore, hold that the amount of ₹ 52.73 lakh is not chargeable to tax. This ground is allowed. Taxability of Software License fees - After analyzing the identical issue in the backdrop of similar expression as used in Article 12(3), it has been held that ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied. Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the “licensed” computer software product over which the licensee has no exclusive rights, no copyright is parted with. Adverting to the facts of the extant case, it is seen that the disputed receipt of ₹ 65.28 lakh from TTL is on account of sale of Software license and not for parting with the copyright of the software. Since facts of the present case are similar to those considered and decided by the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT], respectfully following the precedent, we hold that the amount cannot be brought within the ambit of ‘Royalties’ under Article 12 of the DTAA. Ergo, its taxability is not magnetized. This ground is accepted.
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