TMI Blog2017 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... ICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Revenue : Sh. Vijay Verma, CIT(DR) For The Assessee : S h . Rohit Garg, Adv. ORDER PER H.S. SIDHU : JM The Revenue has filed this Appeal against the impugned Order dated 28.5.2015 of the Ld. CIT(A)-IV, New Delhi relevant to assessment year 2011-12. 2. The grounds raised in this Appeal read as under:- 1. On the facts and circumstances of the case the Ld. CIT(A)-4 has erred in deleting the addition of ₹ 3,70,98,989/- made on account of license fee. 2. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 3. The brief facts of the case are that assessee filed its return of income declaring an income of ₹ 20,79,11,509/- on 28.11.2011. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) was issued on 24.9.2012. Again notice u/s. 143(2) of the Act alongwith questionnaire under section 142(1) was issued on 12.8.20132 and 30.10.2014. Due to change of incumbency AO issued notice u/s. 142(1) on 20.11.2014. In respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2124/Del/2013 (AY 2008-09) has followed the decision taken in assessment year 2007-08 and allowed the claim to the assessee. In this behalf, he filed the copy of the order of the ITAT, as aforesaid. In view of the above, he requested that respectfully following the ITAT, C Bench decision dated 16.1.2015 (Supra) on the addition in dispute, the Appeals of the Revenue may be dismissed. 6. We have heard both the parties and perused the relevant records, especially the impugned order. For the sake of convenience, we are reproducing herewith the relevant portion of the impugned order passed by the Ld. CIT(A):- 6.3 Regarding Ground II of the appeal relating to treatment of license fee paid to GECC as capital in nature, I find that the same issue have been discussed in detail in the appellate order passed by me in the Appellant's case for AY 2008- 09 and AY 2010-11. While deciding on the appeals for these years, on careful examination of the EULA between the Appellant and GECC, I had observed that GECC holds a global license for the software which is widely used and is available 'off the shelf' pursuant to its agreement with Pay Sys. This software enables carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n payment, then the agreement and consequentially, the right of the Appellant to use the software stands terminated forthwith. (Refer in this regard clause 5.1 (a) of the EULA). ( vi) Upon termination, the right to use the licensed program shall end and the Appellant is required to with immediate effect deliver the licensed program to GECC and the Appellant is required to remove the software from its systems. (Refer in this regard clause 5.1 (a) of the EULA). 6.3.2 Keeping in view the above, in the said order for AY 2008-09, I had held that what is transferred to the Appellant through EULA is only a limited right to use the license for a limited period in a prescribed manner and subject to the specific conditions put by the licensor. In view of the above, it is undisputed that the EULA did not have the effect of vesting in the Appellant any enduring benefit or any irrevocable transfer of bundle of rights on it. On the other hand, the Appellant is bound by various conditions in respect of the manner of use of the license. Keeping in view the same, the Appellant Company's case gets squarely covered by the Hon'ble SC in the case of MIs Empire Jute Co. Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software which provides enduring benefits to the assessee; that the consideration is in respect of grant of license and that the information was not only in relation to use of license, but co-ordination and connectivity services were also provided by GECC(USA). He, therefore, held that the acquisition of license granted by the licensor in itself is a capita asset, being intangible asset , which having long validity is capital in nature. We have gone through the End-User license agreement dated 07.07.2000 and we do not find substance in the conclusion arrived at by the ld. Authorities below. It is notable that in terms of clause 2.2 and 2.3, the assessee company is specifically restricted to make copies of the software and make it available to any other period. There is also a bar on the assessee for use of software for the purpose other than that mentioned in clause 2.2 of the agreement. In terms of clause 2.3, the assessee does possess no right either to sell it or alienate in any other manner. The relevant clauses No. 2.2 and 2.3 of the license agreement are reproduced as under : 2.2. GECC shall provide the Licensed Program, any revisions to the Licensed Program and any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that M/s. GECC (USA) itself has received the right to use the software internally including its group entities for its business and it does not have any right to commercially exploit the software. The assessee is vested with limited right to use the licensed program during the currency of license agreement. The agreement nowhere provides any exclusive right to the assessee, but the assessee was vested with the right to use the licensed program for facilitating its business operations enabling the assessee day-to-day management of business and to work with more efficiency. In view of all these terms of agreement and the facts circumstances attending to the case, we are of the considered opinion that end user license agreement in the instance case does not have the effect of any enduring benefit for holding the same as capital in nature. The ld. DR has failed to rebut the contention of the assessee that the impugned software is an application software and is being used for accounting purposes. Such software are used by various banks and financial institutions. Moreover, the ld. CIT(A) in succeeding assessment years 2008-09, 2010-11 and 2011-12 has categorically gave finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accordingly allowed. ITA No. 2124/Del./2013 (By Revenue): 8. The vital issue involved in this appeal is deletion of disallowance of ₹ 2,42,58,933/- made by the Assessing Officer on account of license fee, connectivity charges and co-ordination charges paid to US based company M/s. GE Capital Corporation for use of vision plus software holding the same as capital expenditure. This issue has been decided in favour of the assessee while deciding the appeal of the assessee for the assessment year 2007-08 in the foregoing part of this order. There being no change in the facts and circumstances of the case and the disallowance being based on the same license agreement, we decide the issue in favour of the assessee in this appeal also after following our conclusions given in appeal of assessee for the year 2007-08. Accordingly, the appeal of the Revenue is liable to be dismissed on this count. 6.2 After perusing the aforesaid finding of the Tribunal, we are of the considered view that the issue in dispute in the present appeal, relating to deletion of addition of ₹ 3,70,98,989/- made on account of license fee is squarely covered by the aforesaid decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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