TMI Blog2021 (5) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... D [ 2021 (3) TMI 138 - SUPREME COURT ] amounts paid by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in Section 195 of the Income Tax Act were not liable to deduct any TDS under Section 195 - Decided in favour of assessee. - I.T.A.No.7/2019 - - - Dated:- 26-3-2021 - HON BLE MR. JUSTICE SATISH CHANDRA SHARMA AND HON BLE MR. JUSTICE S.VISHWAJITH SHETTY APPELLANT (By Sri Suryanarayana. T., Adv.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce key is also given to the end users which is solely in order to allow them to activate the software. In the agreement executed between the customers and the appellant, the Business Partners and the end users are specifically prohibited from making copies of, altering, modifying, reverse engineering, decompiling, or in any manner changing the appellant s software. The appellant also provides non exclusive licence to use the software to the end users. Neither the Business Partners nor the end users are permitted to commercially exploit the copyright in the software and the customers are only given a limited and minimum right to use the software. All rights, title to and interest in the software remains with the appellant and no interest in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of assessment whereunder it came to be held that amount received by the Assessee for sale of software amounted to royalty as defined under Explanation 2 to Section 9(1)(vi) of the Income-tax Act, 1961 and under Section 12 of the India-Israel (DTAA) and thereby giving rise to an income chargeable to tax in India? 6. Heard the learned counsel for the parties at length. 7. The controversy involved in the present case, as informed by the learned Counsel for the parties stands concluded on account of the judgment delivered by the Hon ble Supreme Court in the case of ENGINEERING ANALYSIS CENTRE FOR EXCELLENCE PRIVATE LIMITED VS COMMISSIONER OF INCOME TAX ANOTHER AIR 2021 SC 124. The Apex Court in the aforesaid case has held in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka, namely, the judgment of this Court in GE Technology (supra). 47. In all these cases, the licence that is granted vide the EULA, is not a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in Sections 14(a) and 14(b) of the Copyright Act, but is a licence which imposes restrictions or conditions for the use of computer software. Thus, it cannot be said that any of the EULAs that we are concerned with are referred to Section 30 of the Copyright Act, inasmuch as Section 30 of the Copyright Act speaks of granting an interest in any of the rights mentioned in Sections 14(a) and 14(b) of the Copyright Act. The EULAs in all the appeals before us do not grant any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the resident end-user, or directly supplied to the resident end-user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods, which, as has been correctly pointed out by the learned counsel for the assessees, is the law declared by this Court in the context of a sales tax statute in Tata Consultancy Services v. State of A.P., 2005(1) SCC 308 (see paragraph 27). 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in S.195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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