TMI Blog2021 (9) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Samsung Electronics Co. Ltd [ 2009 (9) TMI 526 - KARNATAKA HIGH COURT ] in which it has been held that the consideration received on sale of software license amounts to Royalty . This judgment of the Hon ble Karnataka High Court, along with a batch of others, came up for consideration before the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT [ 2021 (3) TMI 138 - SUPREME COURT ] After carrying out a detailed analysis, the view taken by the Hon ble Karnataka High Court has been overturned by the Hon ble Supreme Court. Thus, it becomes overt that the sole reason taken by the AO at the time of initiation of reassessment for holding the amount as chargeable to tax, based on Samsung El ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance and Training services rendered in relation to such software licenses sold either directly or indirectly through third parties in India during the previous year relevant to the assessment year under consideration, for which no return of income was filed. He initiated re-assessment proceedings by means of a notice u/s 148 of the Act. On being show caused as to why income from sale of software was not offered for taxation, the assessee submitted that it was not the owner of the software licenses rather it was only permitted to distribute such software licenses in the Asia Pacific region. Relying on the judgment of Hon ble Karnataka High Court in CIT Vs. Samsung Electronics Co. Ltd. (2010) 320 ITR 209 and host of other decisions, the AO ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee earned from sale of software licenses and income from support, maintenance and training services rendered in relation to such software licenses sold. The AO has also accepted that the assessee earned the income in question on sale of software etc. The DRP, too, recorded the nature of receipt as sale of software and related services in connection with the sale of software. Thus, the only point which arises for our consideration is as to whether the revenue earned from sale of software and rendering of the related services qua the software is chargeable to tax as Royalty under the Act as well as the DTAA. 5. The assessee is a resident of Singapore and hence governed by the DTAA. Article 12 of the DTAA defines the term R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. Adverting to the facts of the extant case, it is seen that the receipts of ₹ 48.01 crore are on account of sale of Software/license and rendition of services in connection with the software and not for parting with the copyright of the software. Since facts of the present case are similar to those considered and decided by the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. (supra), respectfully foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below that the assessee has any permanent establishment in India. In that view of the matter, the income ceases to be taxable in India. The issue is thus decided in the assessee s favour. 9. Notwithstanding our view on the non-chargeability of the amount received by the assessee as Royalty , we also proceed to dispose of the assessee s ground on initiation of re-assessment, which the ld. AR pressed for adjudication. Before embarking upon this issue, it would be befitting to take note of the reasons recorded by the AO before initiating reassessment, as have been reproduced in the draft order, reading as under: M/s. Wipro Ltd. is an Indian company engaged in the business of providing software development services. It has pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of Royalty . For reaching this opinion, he relied solely on the judgment of Hon ble Karnataka High Court in Samsung Electronics Co. Ltd. (supra) in which it has been held that the consideration received on sale of software license amounts to Royalty . This judgment of the Hon ble Karnataka High Court, along with a batch of others, came up for consideration before the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT (supra). After carrying out a detailed analysis, the view taken by the Hon ble Karnataka High Court has been overturned by the Hon ble Supreme Court. Thus, it becomes overt that the sole reason taken by the AO at the time of initiation of reassessment for holding the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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