TMI Blog2016 (5) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... and, if found proper, it may be allowed. Needless to say that assessee may be given proper opportunity of being heard - ITA Nos. 39, 40, 41 & 42/Hyd/2016 - - - Dated:- 29-4-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For the Petitioner : Shri Sriram Seshadri For the Respondent : Shri M. Sitaram ORDER Per S. Rifaur Rahman, A. M. These appeals are preferred by assessee against a common order of the learned Commissioner of Income-tax(Appeals) 5, Hyderabad, dated 26/10/2015 for AYs 2004-05, 2005-06, 2009-10 and 2010-11. As identical issues are involved in these appeals, they were clubbed and heard together and, therefore, a common order is passed for the sake of convenien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der with various case laws as well as referring to the DTAA dismissed the ground of appeal of assessee by holding as under: 6.15 It is clear from the above said analysis of the facts of the case, the DTAA, Income Tax Act, Copyright Act and judicial verdicts that the payment would constitute 'royalty' within the meaning of Article 12(3) of the DTAA and the provisions of 9(1)(vi) of the Act. The definition of royalty' under clause 9(1)(vi) of the Act is broader than the definition of royalty' under the DTAA. It is clear that the payment made by the appellant to the non-resident supplier would amount to royalty. In view of the said finding; it is clear that there is obligation on the part of the appellant to deduct tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the above software is directly provided by the AE to the users/ clients in India. Further, the End User License Agreement ('EULA'), needs to be accepted by the customer directly before installing the software on its machine. The appellant does not have any access to either the source code or into the actual programming codes present in the software product. Neither the appellant nor the end user customers in India obtain any right to use or make copies of the software. The appellant is a distributor simplicitor, distributing software for margin and also render installation and training services to Indian Customers for using the software products for a fee. 7.1 It is submitted that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchase of software could amount to royalty, the Hon ble ITAT by its order in ITA No 1736/Hyd/2012 dated January 6, 2012 appreciated the facts put forth by the assessee and remanded the matter back to the Ld. AO to reconsider the issue and verify the facts to determine the taxability of software payments after taking into account the judgment as laid down by the Honble Delhi High Court in the case of Dynamic Vertical Software India Pvt. Ltd (332 ITR 222) (Del). Accordingly, the Ld. AO has by his order dated February 23,2015, after considering the facts involved with respect to the payments by the assessee towards purchase of software products, accepted the contentions of the assessee that such payments cannot be treated as royalty and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, it is clear that in the AYs 2007-08 and 2008-09, the AO passed order confirming the transaction as purchase and not as royalty. At the same time, in the present cases under consideration, AO has taken a different view by confirming the transactions with AE as royalty and rejected the contention of assessee. It is clear that the revenue has taken distinct view on the similar transaction. 9.1 In the case of AE i.e. Energy Solutions International Inc. (ESI Inc.), the coordinate bench of this Tribunal has already confirmed this transaction as purchase and dismissed the revenue s contention that these were royalty after analyzing the business module of AE . The relevant observations of the coordinate bench are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as purchase of software . Accordingly, the grounds raised on this issue are allowed in all the appeals under consideration. 10. In AY 2010-11 being ITA No. 42/Hyd/2016, there is another ground raised by the assessee, which is as follows: 1. Disallowance towards payment made towards fees for annual maintenance services amounting to ₹ 3,96,352/-. 11. As regards disallowance towards payment made towards fees for annual maintenance services, the AO made an observation that the tax was not deducted on technical services rendered by the nonresidents to the assessee company as indicated in the tax audit report at Col. No. 17(f). He, therefore, added the amount of ₹ 3,96,352/- to the income of the assessee in accordance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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