Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2024 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (5) TMI 486 - ITAT DELHIIncome deemed to accrue or arise in India - Revenue earned from supply of software - ‘royalty’ u/A 13 of DTAA between India and United Kingdom - software is Shrink wrap software or customized software? - assessee was incorporated under the laws of United Kingdom (UK) with the primary objective of carrying on the business of specialist, engineers and dealers in computer system - HELD THAT:- As decided in assessee own case [2022 (8) TMI 1497 - ITAT DELHI] the software catered to by the assessee is a customized software and not a shrink wrap one as it is exclusively developed for the organization to suit its business requirement and that it is very expensive which is a logical corollary to the customized software. The issue of royalty or not on software has been examined by the Hon’ble High Court in case of Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT] Where in it was held that supply of software is not ‘royalty’ despite the amendments made by Finance Act 2012 to section 9(1)(vi) of the Act. It has been observed that though Explanation 4 was added to section 9(1)(vi) by the Finance Act 2012 with retrospective effect to provide that all consideration for user of software shall be assessable as “royalty”, the definition in the DTAA has been left unchanged. Following the decision in case of Siemens AG [2008 (11) TMI 74 - BOMBAY HIGH COURT] it was held that amendments cannot be read into the treaty. Once assessee has opted to be assessed by the DTAA, the consideration cannot be assessed as “royalty” despite the retrospective amendments to the Act. The right to reproduce and the right to use computer software are distinct and separate rights, the former amounting to parting with copyright and the latter, in the context of nonexclusive EULAs, not being so. At this juncture, we have examined the written submission of the ld. DR and find that it would not make any material difference to the fact that the buyer of the software in the instant case also has the user right only. The buyer has no right to re-sale the product and it still remained a copyrighted article which the buyer cannot alter modified, reproduced i.e. own will unless authorized. And such authorization has been given to re-supply to BSNL for their use, at the same time, keeping the all other rights with the assessee. Holding thus, the Hon’ble Supreme Court [2021 (3) TMI 138 - SUPREME COURT] decided the issue in favour of the taxpayer and laid down that the payments made by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers as consideration for use/resale of shrink-wrapped software does not amount to payment for royalty for the use of copyright in the computer software considering the definition of royalty under the DTAAs. Hence, keeping in view the judgment of Hon’ble Apex Court, we hereby allow the appeal of the assessee on merits. Appeal of the assessee is allowed.
|