TMI Blog2022 (2) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... on the disputed issue. Grounds are dismissed. - ITA Nos. 713 And 715/Del/2020 - - - Dated:- 9-2-2022 - Shri Saktijit Dey, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Appellant : Ms. Sapna Bhatia, CIT-DR For the Respondent : Shri Prashant Meharchandani, Adv. ORDER PER SAKTIJIT DEY, JM: Captioned appeals by the Revenue arise out of two separate orders, both dated 05.11.2019, of learned Commissioner of Income-tax( Appeals), 42 Delhi, pertaining to the assessment years 2015-16 and 2016-17. 2. The grounds raised in both the appeals are identical and read as under: 1. Whether on the facts and in the circumstances of the case the Ld. CIT(A) is correct in law in holding that the income from supply of software embedded in the hardware equipment or otherwise to customers in India does not amount to royalty under Section 9(1)(vi) of the Income-tax Act and under Article 13 of the Double Taxation Avoidance Agreement (DTAA) between India and France? 2. Whether on the facts and circumstances of the case Ld. CIT(A) was right in ignoring specific provision as given in section 9(1)(vi) of the Income-tax Act, 1961 holding the software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he brought to tax the royalty on the embedded software while completing the assessment for the impugned assessment years. Against the assessment order so passed, assessee preferred appeals before learned Commissioner (Appeals). 6. Taking note of the fact that in case of Alcatel Lucent France in assessment year 2006-07, both Learned Commissioner and Tribunal have reversed the decision of the Assessing Officer in treating the software component supplied with the equipment as royalty, which has been affirmed by the Hon ble Delhi High Court while dismissing Revenue s appeals, deleted the additions made by the Assessing Officer in both the assessment years under dispute. While doing so, he also took note of the decision of the Hon ble Delhi High Court in assessee s own case in assessment year 1997-98 holding that supply of software is not taxable as royalty either under Section 9(1)(vii) or even under the Tax-Treaty. 7. We have considered the rival submissions and perused the material available on record. It is a common point between the learned Counsel appearing for the assessee and learned Departmental Representative that the issue arising for consideration is squarely covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings be treated as return filed in the assessment proceedings. In the reassessment order, the A.O. observed that the assessee is a company incorporated in France and other concerned countries used to manufactured, trade and supply equipments and services for GSM Cellular Radio Telephones Systems. The assessee had supplied hardware and software to various entities in India. Software licensed by the assessee embodies the process which is required to control and manage the specific set of activities involved in the business use of its customers. Software also made available the process to its customers, who used it to carry out their business activities. In this view of the matter, the A.O. felt that the consideration of supply of software amounted to royalty under Sect 9(1)(vi) of the Income-tax Act. The CIT(Appeals) to whom the assessee appealed and later the ITAT to whom the Revenue appealed concurred held that the supply of embedded software (which was part of the hardware supplied to the assessee s customers by it) under consideration did constitute royalty and therefore, Section 9(1)(vi) was not attracted and the same reasons. Article 13(3) of the DTAA was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software program may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, it Inch are susceptible to sales tax. Even intellectual property, once it is put on to a media, -whether it be in the form of books or canvas (In case of painting) or computer discs or cassettes, and marketed would become goods . We see no difference between a sale of a software are programme on a CD floppy disc from a sale of music on a cassette CD or a sale of a film on a video cassette CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software are and the media cannot be split up. What the buyer purchases and pays for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no substantial question of law arises. The appeal is accordingly dismissed. 9. This order of the Hon ble High Court of Delhi has been upheld by the Hon ble Supreme Court in a bunch of appeals in the case of Engineering Analysis Centre of Excellence Private Ltd. Vide order dated 02.03.2021 and in the bunch of appeals the assessee is at Civil appeal No. 10674 of 2016, 010673 of 2016 and SLP(C) No. 28868 of 2016. The relevant findings of the Hon ble Supreme Court read as under:- 168. Given in the definition of royalties contained (in Article 12 of 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 explanation 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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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