TMI Blog2021 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... oses. - IT(IT)A No. 739/Bang/2020 - - - Dated:- 23-8-2021 - Chandra Poojari, Member (A) And Beena Pillai, Member (J) For the Appellant : Mahima Goud, Advocate For the Respondents : Neera Malhotra, CIT(DR) ORDER Chandra Poojari, Member (A) 1. This appeal is by the assessee against the order dated 29.10.2020 passed by the Assessing Officer u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [the Act] on the following grounds:- The Appellant submits that: 1. That the order of the Respondent/Assessing Officer (AO' for short) pursuant to the directions of the Dispute Resolution Panel (the DRP' for short), is erroneous, contrary to the facts and circumstances of the case and is therefore liable to be set aside. 2. Treatment of income from sale of off-the-shelf software as 'royalty'. a. The AO and the DRP erred in law and on facts in treating the entire consideration received from Indian customers towards sale of shrink wrapped and off-the shelf software as 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961 ( the Act ) and also under Article 12 of the India-Ireland Double Taxation Avoidance Agreement ( Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isregarding the fact that the Appellant in the present case is engaged in the business of reproduction and distribution of software, whereas the assessee in the above case was engaged in the business of development of computer software. k. That in any event, the decision in the case of Samsung (supra) is not applicable to the facts of the Appellant, which the AO and the DRP failed to appreciate. l. That the other decisions relied upon by the AO to hold against the Appellant are distinguishable on facts. m. The DRP erred in merely relying on the orders passed by the DRP in the Appellant's own case for previous assessment years, and the order of this Hon'ble Tribunal for the assessment year 2012-13, without appreciating the facts of the present case independently. n. That in any event, the Appellant has preferred an appeal against the order passed by this Hon'ble Tribunal for the assessment year 2012-13 and the same is admitted. o. That without prejudice, the AO and DRP ought to have appreciated that notwithstanding the retrospective amendment made to Section 9(1)(vi) of the Act vide the Finance Act, 2012, the definition of 'royalty' under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the result, the order dated 07.07.2017 passed by the Income Tax Appellate Tribunal is hereby quashed. In the result, the appeal is allowed. 3. The Tribunal in assessee's own case for the AY 2016-17 in IT(IT)A No. 2531/Bang/2019 by order dated 27.07.2021 following the Hon'ble Supreme Court judgment in Engineering Analysis Centre of Excellence P. Ltd. (supra) held as follows:- 4. Aggrieved by the final assessment, the assessee has preferred this appeal before the Tribunal. At the very outset, the learned Counsel for the assessee submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence P. Ltd. v. CIT reported in [2021] 432 ITR 471 (SC). The learned Departmental Representative was not able to controvert the submissions made by the learned Counsel for the assessee. In view of the judgment of the Hon'ble Apex Court, which is identical to the facts of this case, we hold that the payment of ₹ 42,96,49,035 received by the assessee-company would not constitute royalty and cannot be brought to tax. It is ordered accordingly. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that no copyright in the computer programme is transferred either to the distributor or to the ultimate end-user. This is further amplified by stating that apart from a right to use the computer programme by the end-user himself, there is no further right to sublicense or transfer, nor is there any right to reverse-engineer, modify, reproduce in any manner otherwise than permitted by the licence to the end-user. What is paid by way of consideration, therefore, by the distributor in India to the foreign, non-resident manufacturer or supplier, is the price of the computer programme as goods, either in a medium which stores the software or in a medium by which software is embedded in hardware, which may be then further resold by the distributor to the end-user in India, the distributor making a profit on such resale. Importantly, the distributor does not get the right to use the product at all. 46. When it comes to an end-user who is directly sold the computer programme, such end-user can only use it by installing it in the computer hardware owned by the end-user and cannot in any manner reproduce the same for sale or transfer, contrary to the terms imposed by the EULA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to nonresident computer software manufacturers/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 of the Income-tax Act. The answe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
