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2018 (12) TMI 1202 - AT - Income TaxAccrual of Income in India - assessee as a non-resident company which received licence fees in terms of "Membership and Technology Transfer Agreement" - claim of exemption from income tax - computation of income u/s 44BB - taxability as royalty u/s 9(1)(vi)- levy of surcharge and interest u/s 234B - Held that:- If one goes by the definition as enshrined in the Treaty read with relevant provisions of Indian Copyright Act, 1957 and also the relevant Agreement amongst the parties, it is seen that the payment for CMG’s membership by the ONGC is purely for non-exclusive, non-transferable licence to use the technology only for the internal purpose. There is neither sale nor licence of the copyright in any kind of software or technology. Thus, under the treaty, such a payment cannot be held to be reckoned as royalty. We hold that nature of payment as received by the assessee through ONGC in terms of the aforesaid agreement cannot be characterized as ‘royalty’ and, therefore, the same is outside the purview of taxation in view of India-Canada DTAA. Accordingly, this issue is decided in favour of the assessee. In so far as whether amendment in section 9(1)(vi) can be read into the Treaty, this issue now stands at rest for the various judgments of the Hon'ble Delhi High Court including that of DIT vs. Infrasoft Ltd. (2013 (11) TMI 1382 - DELHI HIGH COURT) wherein as held that the amendment in the domestic law cannot be read into the Treaty. In view of our finding given above, the issue of levy of surcharge and interest u/s 234B has become purely academic though as stated by the ld. counsel this issue now stands covered in favour of the assessee by the judgments referred and relied upon before us. From assessment year 2007-08 onwards there is a payment for purchase order of additional software for annual lease wherein certain addition has been made in the earlier membership and technology transfer agreement whereby certain technology executable has been given access to. The ONGC is paying annual lease charge with maintenance, which again, is not for purchase of any software and similar payment in assessment year 2005-06 has been held to be not royalty by the ld. CIT(A). From the perusal of the invoices raised, it is seen that the payment has been made for annual lease charges with maintenance and once in the earlier years it has been held not to be in the nature of royalty, then, same payment cannot be held to be ‘royalty’ in this year. - Decided in favour of assessee.
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