TMI Blog2022 (4) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... ember And Sh. Anubhav Sharma , Judicial Member For the Appellant : Sumisha Murgai , CA For the Respondents : Anupama Anand , CIT , DR ORDER Per R. K. Panda , Accountant Member This appeal filed by the assessee is directed against the order passed by the AO u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 relating to A.Y. 2015-16. 2. Facts of the case, in brief, are that the assessee is a company incorporated in the United States of America (USA) and is engaged in the business of developing, manufacturing and distribution of software products. The assessee has entered into International Distributor/Reseller Agreements with distributors in India for supplying software products and for providing ancillary support services. It filed its return of income on 30.09.2015 declaring Nil income. The case was selected for scrutiny and a statutory notice u/s. 143(2) of the Income Tax Act, 1961 was issued and served on the assessee. In response to the same, the AR of the assessee appeared from time to time and filed the requisite information/details. During the course of assessment proceedings, the AO noted that the assessee has received an amount of USD 828170 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final order. 5. The AO in the final assessment order accordingly made addition of ₹ 4,53,68,924/- as income from Royalty . Similarly, he also made addition of ₹ 60,83,576/- as income from FIS. 6. Aggrieved with such order of the AO/DRP, the assessee filed appeal before the Tribunal by raising the following grounds: 1. That the order of the Learned the Deputy Commissioner of Income Tax, Circle-1(1)(1), New Delhi ( the learned Assessing Officer or the learned AO ) passed pursuant to the direction of the learned Dispute Resolution Panel ('the learned Panel' or 'the learned DRP') is bad in law and liable to be quashed. 2. The learned AO/DRP erred in holding that the payments received by the Appellant on sale of software to Indian resellers/distributors is in the nature of 'royalty' chargeable to tax under Section 9(1)(vi) of the Income-tax Act, 1961 ('the Act' for short) and under Article 12 of the India-USA Double Taxation Avoidance Agreement ('the DTAA' for short). 3. That the learned AO/DRP overlooked the difference between the transfer of right to use a copyrighted article as against the transfer of copyr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the I.T. Act and Article 12 of the India-USA DTAA. 9. After hearing both the sides, we find identical issue had come up before the Tribunal in assessee's own case in the immediately preceding assessment year. We find the Tribunal vide ITA No. 6064/Del/2017 order dated 17.02.2022 for A.Y. 2014-15 has decided the issue and held that consideration received by the assessee cannot be brought to tax as per India-USA DTAA. The relevant observation of the Tribunal from para 2 to 16 reads as under: 2. The sum and substance of the grievance of the assessee is that the Assessing Officer/DRP erred in holding that the payments received by the assessee on sale of software to India resellers/distributors is in the nature of 'Royalty' chargeable to tax u/s. 9(1)(vi) of the Act and under Article 12 of the India - USA Double Taxation Avoidance Agreement [DTAA]. 3. Representatives were heard at length. Case records carefully perused. 4. Briefly stated, the facts of the case are that the appellant is engaged in the business of developing, manufacturing and distribution of software products and has entered into international distributor/reseller agreements in India fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r right to use, any copy right or a literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula or process. A perusal of the agreement with the Indian distributors/resellers shows that the resellers/distributors have a non-exclusive, non-transferrable right to sell/re-sell the assessee's products and Maintenance Technical MTSS services ( MTSS ) to customers within the specified territory. Reseller/Distributor cannot make copies of the products for resale and cannot alter the product package that it receives from the assessee in any way. All the rights, including all intellectual property rights in the products, updates and other localizations or translations are owned by the assessee and no ownership rights have been transferred to Reseller/Distributor. 11. It is further provided that the Reseller/Distributor cannot make any representation or warranties to resellers or customers on assessee's behalf and trade with products that are not made by the assessee. It is also provided that the Reseller/Distributor cannot reproduce the software products or modify and create any derivative work and copies of assessee's product. The Reseller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The rule the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from impugned judgments of the High Court of Delhi are dismissed. 14. The factual matrix involved in the case in hand, read with the ratio laid down by the Hon'ble Supreme Court [supra], we are of the considered view that no right in copy right is being transferred and accordingly, consideration received by the assessee cannot be brought to tax as per India - USA DTAA. 15. Incidentally, in Assessment Years 2018-19 and 2019-20, the Revenue has accepted the stand of the assessee. Considering the facts of the case in totality, in light of the decision of the Hon'ble Supreme Court [supra], we direct the Assessing Officer to delete the impugned addition. 16. In the result, the appeal of the assessee in ITA No. 6064/Del/2017 is allowed. 10. Since, the facts of the instant case are identical to the facts of the case decided by the Tribunal in assessee's own case for the immediately preceding assessment year, therefore, respectfully following the decision of the Tribunal and in absence of any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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