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2019 (5) TMI 276 - AT - Income TaxRoyalty receipt - maintenance fees from customer - sale of software by itself & by group company - the group company transferred the entire maintenance contract in respect of the software sold by them in India to the assessee - right to use contemplated by the Article 12(3) of the DTAA - fees for included services - HELD THAT:- In the light of the conclusions in the case of M/s. i2 Technologies (Netherlands) BV Vs. ACIT (International Taxation) [2017 (3) TMI 1748 - ITAT MUMBAI] which would hold good for AY. 2006-07 also as the facts are identical, the sum-in-question cannot be regarded as royalty because the receipts in question cannot be said to be ancillary to supply of software which was regarded as royalty. The assessee directly sold software and also carried out maintenance services under agreements with the persons to whom software licenses were sold. Consequently, the maintenance services which were also in connection with the supply of software were regarded as royalty. In the present case, however, the supply of software has already been held to be not in the nature of royalty by the decision of ITAT, Mumbai. We have not gone into the question regarding the applicability of Article 12(3) and also the definition of royalty is given in Explanation-2 to Section 9(1)(vi) and our conclusions in these appeals and are guided only by the ruling of the Mumbai Bench of the ITAT in the case of M/s. i2 Technologies (Netherlands) BV Vs. ACIT (International Taxation) (supra). We are of the view that the maintenance revenue received by the assessee cannot be regarded as a royalty chargeable to tax in India. The addition made is therefore directed to be deleted. - Appeal of assessee is allowed.
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