TMI Blog2021 (8) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... deration for the use of, or the right to use, any copyright of a literary work includes a computer program or software. It was held that regarding the expression use of or the right to use , the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a)(i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty. As contended by the DR, neither the AO nor the CIT(A) had the benefit of the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] and therefore in all fairness, the issue should be remanded to the AO to examine the terms of the agreement under which right were granted to the Assessee in the light of the provisions of the DTAA as to whether the same would amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, Connecticut which is the main computer centre for the World Courier Group and supplies a variety of information to the operating, marketing, sales and finance and administration teams. This also includes Infrastructure Services, which is responsible for the design and availability of IT infrastructure for the World Courier Group. It incurs infrastructure, maintenance and development costs. The development costs may be specific to projects for an individual group entity or related to development of common international systems. The costs are charged to group entities on the basis of actual user. 5. Under the Software Maintenance Agreement, World Courier Inc. is required to provide inter alia the following services: a. Remedial maintenance consisting of diagnosis and corrective action for problems in the operation of the software b. Supply of all product upgrades and new releases and installation of such upgrades and new releases c. Provide such software and or system enhancements as may from time to time be requested by the Customer, at extra cost d. Provide consultancy services in connection with the purchase and operation of computer hardware and software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sum of ₹ 84,89,691/-. 9. On appeal by the assessee, the CIT(A) confirmed the order of the A.O. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal. 10. Learned Counsel for the assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd., Vs. CIT, Civil Appeal Nos. 8733 and 8734/2018, judgment dated 02.03.2021 wherein the Hon'ble Supreme Court has taken a view contrary to the view taken by the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (supra). The learned DR, while relying on the order of the CIT(A), further pointed out that neither the AO nor the CIT(A) have examined the end users licence agreement to find out whether there was any assignment of any copyright and therefore the issue should be remanded to the AO for consideration afresh. He pointed out that agreement in question does not appear to be purely for use of software but consists of other services also and this aspect also should be examined by the AO. 11. We have carefully considered the rival submissions, perused the order of the AO and Ld. CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the work; 6. To make any adaptation of the work; and 7. To do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-clauses (1) to (6). The court held that a licence from a copyright owner, conferring no proprietary interest on the licensee, does not involve parting with any copyright. It said this is different from a licence issued under section 30 of the Copyright Act, which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. What is 'licensed' by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is the sale of a physical object which contains an embedded computer program. Therefore, it was a case of sale of goods. The payments made by end-users and distributors are akin to a payment for the sale of goods and not for a copyright license under the Copyright Act. The decision of the Hon'ble Karnataka High Cour in the case of CIT Vs. Samsung Electronics Co. Ltd. (2011) 16 taxmann.com 141 (Karn.), on which the revenue authorities placed reliance in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee in the light of the provisions of the DTAA as to whether the same would amount to royalty. We accordingly remand the issue to the A.O. The AO will afford opportunity of being heard to the Assessee in the set aside proceedings. The appeal of the Assessee is accordingly treated as allowed for statistical purpose. 14. ITA No. 1727/Bang/2017: In this appeal, the issue to be decided is as to whether the AO is justified in disallowing a sum of ₹ 1,15,68,449/- being software charges on the ground of non-deduction of tax at source. The facts and circumstances under which this addition is made by the AO under section 40a(ia) of the Act are identical to the facts and circumstances as it prevailed in Assessment Year 2014-15. We have already remanded the issue to the AO for fresh consideration with certain directions. The said directions and decisions will equally apply to the present Assessment Year also. We hold and direct accordingly. The other issues raised in the grounds of appeal were not pressed by the learned Counsel for the assessee. The appeal of the Assessee is accordingly treated as partly allowed for statistical purpose. 15. In the result, the appeal for AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
