TMI Blog2021 (6) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (3) TMI 138 - SUPREME COURT] respectfully following the precedent, we hold that the amount cannot be brought within the ambit of Royalties under Article 12 of the DTAA. Case of the assessee before the authorities below has been that the receipt is not in the nature of Royalty , but Business Profits - In order to bring `Business profits of a resident of the other country to tax in India within the ambit of Article 7, it is sine qua non that the foreign enterprise must have a Permanent Establishment (PE) in India in terms of Article 5 of the DTAA. In the absence of a PE, the taxability under Article 7 does not trigger. The assessee categorically submitted before the DRP that it did not have any PE in India. As the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial than that of the Act would apply making the receipt from sale of software license as not chargeable to tax in India. - ITA No.175 & 1755/PUN/2018 - - - Dated:- 15-6-2021 - Shri R.S. Syal, Vice President And Shri Partha Sarathi Chaudhury, Judicial Member For the Assessee : Shri V. Narendra Sharma For the Revenue : Shri Mahadevan A.M. Krishnan ORDER PER R.S.SYAL, VP : These two appeals by the assessee are directed against the final assessment orders dated 20-11-2017 and 14-09-2018 passed by the Assessing Officer (AO) u/s. 147 r.w.s. 144(1)(b) r.w.s. 144C(13) in relation to the assessment year 2009-10 and u/s.144C(13) r.w.s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is conclusion, the AO relied on certain judgments upholding his point of view. It is this taxability of ₹ 2.42 crore as income from Royalty by the AO in the final assessment order that has been assailed before the Tribunal. 3. We have heard both the sides through Virtual Court and gone through the relevant material on record. Whereas the case of the assessee is that the receipt from M/s. Honeywell Technology Solutions Lab Pvt. Ltd. is `Business Profits covered under Article 7 of the DTAA, the Revenue has set up a case that it is in the nature of Royalties under the Article 12. The assessee is an American company and hence governed by the DTAA. Article 12 of the DTAA defines the term Royalties in para 3 as under: The term roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it came to hold that ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied. Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the licensed computer software product over which the licensee has no exclusive rights, no copyright is parted with. 5. It is discernible from the impugned order that the AO invoked Explanation 4 to section 9(1)(vi) of the Act to hold the receipt as royalty under the Act. In this regard, the Hon ble Supreme Court in the aforenoted case further held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Appellant does not have a PE in India . As the assessee did not have a PE in India during the relevant year, the mandate of Article 7 cannot activate. A fortiori , the receipt cannot be charged to tax in India as Business profits either. In view of the foregoing discussion, we are satisfied that the amount of ₹ 2.42 crore received by the assessee from sale of software/license to M/s. Honeywell Technology Solutions Lab Pvt. Ltd. ceases to chargeable to tax in India. This issue is, therefore, decided in assessee s favour. 8. In view of our decision on merits about the non-taxability of ₹ 2.42 crore, which is the only addition made by the AO in the assessment order, there is no need to deal with the ground challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X
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