TMI Blog2019 (7) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT PUNE] has in a very elaborate manner explained the difference between the copyright‟ and copyrighted article‟ and whether the consideration received on sale of right to use of copyrighted article would amount to payment of royalty. DTAA between India and USA such payments made to USA based company does not fall within the purview of royalty as defined in Article 12. It is a well settled law that where the provisions of DTAA are beneficial to the assessee, the same will prevail over the provisions of the Act. Thus we find merit in the contentions of the assessee. The receipts in the hands of assessee are not in the nature of royalty and hence, are not taxable in India. - Decided in favour of assessee. - ITA Nos. 73 & 74/PUN/2011 - - - Dated:- 5-7-2019 - SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM For the Assessee : Shri R.R. Vora For the Revenue : Shri S.B. Prasad ORDER PER VIKAS AWASTHY, JM : These two appeals by the assessee are directed against the assessment order dated 15-11-2010 for assessment year 2004-05 passed u/s. 143(3) r.w.s. 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment year 2004-05 : On the facts and in the circumstances of the case and in law, the Hon‟ble DRP and consequently the learned AO have : 1. Ground challenging the initiation of re-assessment proceedings under section 147 Erred in invalidly initiating re-assessment proceedings as the reason provided by the learned AO is a mere change of opinion in respect of already assessed transaction and such change in opinion cannot form the basis of initiating re-assessment proceedings. 2. Ground challenging the taxability of consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services of ₹ 77,538,913 Erred in treating the consideration for facilitating grant of user rights in off-the-shelf software and provision of related support services received by the Appellant from Cummins India Limited ( CIL‟) and Cummins Sales and Services (India) Limited ( CSSIL‟) totaling to ₹ 77,538,913 taxable as Royalty‟ is defined in Explanation 2 to section 9(1)(vi) of the Act as well as under Article 12 of the Double Taxation Avoidance Agreement between India and USA ( DTAA‟) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the software vendors. The appellant has obtained non-exclusive user right and does not have any rights to sub-license/reverse engineer the software. 5.3 The ld. AR contended that the issue; Whether the grant of user rights in the software and the payments made in lieu thereof partake the character of royalty or not, has been considered by the Co-ordinate Bench of Tribunal in the case of John Deere India Pvt. Ltd. Vs. DDIT in ITA Nos. 905 906/PUN/2015 for the assessment years 2007-08 and 2008-09 decided on 23-01-2019. The ld. AR pointed that the aforesaid case was the case of payments made to the suppliers, whereas in the present case the assessee is recipient of such payments. The ld. AR further submitted that the Tribunal in the case of Symantec Corporation Vs. DCIT in ITA No. 387/PUN/2017 for the assessment year 2013-14 decided on 05-04-2019 has considered the identical issue. The facts in the aforesaid case were identical to the facts of the case of present assessee, as the appellant therein was also recipient of the payments for providing software to its Indian affiliates. The Tribunal after placing reliance on the decision of John Deere India Pvt. Ltd. (supra) held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased off-the-shelf. The agreement for supply of software with CIL and CSSIL (Indian companies) merely provides the right to use off-the-shelf program and no copyright in these off-theshelf software was granted to CIL and CSSIL. The assessee itself had no right to modify the softwares purchased from third parties. The primary contentions of the assessee is that what is provided to the Indian affiliates i.e. CIL and CSSIL is the mere rights in the copyrighted software and not the rights of use of copyright. 8. We observe that the Co-ordinate Bench of Tribunal in the case of John Deere India Pvt. Ltd. Vs. DDIT (supra) has in a very elaborate manner explained the difference between the copyright‟ and copyrighted article‟ and whether the consideration received on sale of right to use of copyrighted article would amount to payment of royalty. The Tribunal after considering catena of judgments on the issue concluded as under : 90. In conclusion, we hold that purchase of software by the assessee being copyrighted article is not covered by the term royalty‟ under section 9(1)(vi) of the Act. Where the assessee did not acquire any copyright in the software, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er applying the ratio laid down in the case of John Deere India Pvt. Ltd. Vs. DDIT (supra) held as under : 12. The Tribunal thus, in the hands of recipient had held that where the purchase of software was copyrighted article, then the same was not covered by the term royalty‟ under section 9(1)(vi) of the Act and it was further held that the amended definition of royalty‟ under the domestic law could not be extended to the definition of royalty‟ under DTAA, where the term originally defined had not been amended. Applying the said ratio to the facts of the present case, we hold that in the hands of assessee, the consideration received on sale of software is not royalty‟ under Explanation 2 to section 9(1)(vi) of the Act and is also not covered by the definition of royalty‟ under DTAA between India and USA. Accordingly, the assessee is not exigible to tax on the said consideration received in its hands. We reverse the orders of authorities below in this regard. 11. We further observe that as per DTAA between India and USA such payments made to USA based company does not fall within the purview of royalty as defined in Article 12. It is a wel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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