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TMI Blog2022 (1) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, claiming that it did not have any Permanent Establishment (PE) in India. During the course of the draft assessment proceedings, the AO observed that the assessee received a sum of Rs. 1,69,29,769/- towards 'Provision of Design and Engineering services'. The AO did not dispute the non-chargeability of Rs. 1.17 crore out of such receipts. The remaining sum of Rs. 52,73,977/- received from Tata Technologies Limited, India (TTL) for providing services to Tata Motors Limited, India (TML) was construed by the AO as fees for technical services. The assessee's contention that it did not 'make available' any technical knowledge, experience or skill etc. through the services and hence, was outside the ambit of taxation in terms of Article 12(4) of the Double Taxation Avoidance Agreement between India and USA (DTAA), did not find favour with the AO. Treating the said amount as `fees for technical services/fees for included services', the AO proposed to include Rs. 52.73 lakh in the total income. The assessee remained unsuccessful before the Dispute Resolution Panel (DRP), which echoed the view of the AO that the amount received by the assessee was for services with reference to contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities required for the management, design, engineering and development for the 2014 Vista FL LHD and Vista FL LHD with NCAP 3 star". The activities to be performed by TTL include - Review key requirements for packaging/layout as required for NCAP 3 star, benchmark data, design brief and any other relevant necessary documents; Define modified architecture/structure for systems and components; Develop all 3D and 2D math data to TML Standards for all component assembly; Track the cost and BOM changes; Carry out interior ergonomic and safety evaluation study; Creation of graphical BOM for all change parts; Coordination and update designs to meet manufacturing and technical services requirements regarding infrastructure modifications to ensure complexity with current products; Construct the required Vehicle Configuration (VC) with all necessary components required to construct the full VC for the X101Aa (Vista FL LHD and FL LHD NCAP 3 star) including existing component designs necessary to support the specified content; Suggest Vehicle technical Specification for Vista FL LHD and FL LHD NCAP 3 star etc. Clause III of the PVR states that: "TTL shall prepare the Overall schedule, proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the requirements of CFT members. Provide technical solutions. 01. Design Lead : From Start of Project till SOP. Design lead to responsible for a. CAD & 2D release on time b. Resolution of all the issue till SOP c. Give solutions for all the issues & failures from testing, supplier, service, design reviews, design optimizations. f. Participate in all the reviews/meeting in TML, with supplier. Understand the requirements of CFT members & ensure the delivery in time." 5. The same para further provides for the manpower support required from TTL India. It states that TTL India shall send manpower support required to complete the project on time and to meet all the deliveries as indicated in this documents, who will be responsible for update 3D CAD & 2D drawings as per design lead; release 3D CAD, drawings in PLM; Participate in reviews & meeting in TML or outside the TML; and Give Solutions for all the issues & failures from testing, supplier, service, design reviews, design optimizations. 6. On going through the above PVR, it clearly transpires that the TTL was supposed to do complete engineering and development of cockpit & console for Vista X101A LHD non- ENCAP version ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only to ensuring smooth sailing of the project with the help of two of its personnel. Por una parte, the services by TTL can be loosely described as making available the technical services to TML, por otra parte, the services provided by the assessee are principally in the realm of supervisory having a touch of technical knowledge, which did not provide anything tangible either to TTL or TML. 8. The ld. AR did not dispute the consideration received by the assessee from TTL in the TML project as fees for technical services covered u/s.9(1)(vii) of the Act. His reliance was only on the DTAA for claiming that the amount received by the assessee was not in the nature of `Fees for Included services' covered under Article 12 of the DTAA, which defines the expression `Fees for included services' in para 4 as under : "4. For purposes of this Article, 'fees for included services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L to TML satisfy the test of 'make available', the provision of services by the assessee to TTL fall short of the same and hence they do not fall within the definition of `Fees for included services' under Article 12(4) of the DTAA. Going with the mandate of section 90(2) of the Act, it is the definition of `Fees for Included services' under the DTAA which would prevail over the definition of `Fees for technical services' u/s.9(1)(vii) of the Act. Since the assessee did not receive any Fees for Included services under Article 12(4) of the DTAA to TTL, the sum of Rs. 52.73 lakh, can't be charged to tax as Fees for Technical services. 10. We have observed above that the assessee categorically stated before the AO that it did not have any Permanent Establishment in India, which point has not been controverted by the Officer. In the absence of the assessee having any PE in India as per Article 5 of the DTAA, the amount received from TTL cannot be considered as Business profits in terms of Article 7. We, therefore, hold that the amount of Rs. 52.73 lakh is not chargeable to tax. This ground is allowed. 11. The next issue raised in this appeal is against the taxability of Software Lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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.
15. Adverting to the facts of the extant case, it is seen that the disputed receipt of Rs. 65.28 lakh from TTL is on account of sale of Software license 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 following the precedent, we hold that the amount cannot be brought within the ambit of 'Royalties' under Article 12 of the DTAA. Ergo, its taxability is not magnetized. This ground is accepted.
16. In the result, the appeal is allowed.
Order pronounced in the Open Court on 21st December, 2021. X X X X Extracts X X X X X X X X Extracts X X X X
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