TMI Blog2023 (3) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... to exploit it other than for permissible usage. The matter is covered by the decision of the Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] respectfully following the same, we hold that the impugned payments made by the assessee do not fall in the definition of royalty and consequently, do not attract any addition on that score. Appeal of the assessee is allowed. - ITA-IT No. 471/Hyd/2022 - - - Dated:- 7-3-2023 - Shri Rama Kanta Panda, Accountant Member And Shri K.Narasimha Chary, Judicial Member For the Assessee : Shri K.C. Devdas, AR For the Revenue : Shri Rajendra Kumar, CIT-DR ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 25/07/2022 passed by the learned Commissioner of Income Tax (Appeals)-10, Hyderabad ( Ld. CIT(A) ), in the case of M/s. S P Capital IQ (India) Private Limited ( the assessee ) for the assessment year 2014-15, assessee preferred this appeal. 2. Briefly stated relevant facts are that the assessee Company is engaged in the business of providing Information Technology Enabled Services (ITES) to its parent company S P Global Market Intelligence LLC, USA (earlier known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oftwares. He, therefore, submits that the decision of the Hon ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited (supra) is applicable to the facts of the case. 5. Per contra, learned DR heavily relied upon the decision of the authorities below and submitted that unless the facts are verified, the applicability of decision cannot be decided. 6. We have gone through the record in the light of the submissions made on either side. It is a fact that the learned Assessing Officer herself recorded that though the license agreement was entered into by the parent entity of the assessee with Microsoft and Dell and the assessee is provided with the same for its use, the invoices issued by the Microsoft specifying the various usages by the users, clearly show that the assessee could have directly accessed the software under the license from the Microsoft and Dell. She further recorded that the parent company infact has no role in the entire exercise except holding the license on its name but as a matter of fact irrespect of the nature of task performed on these softwares, it is the assessee who is using it, is bound by the terms of license issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions. The crucial link, therefore, is that a deduction is to be made only if tax is payable by the non-resident assessee, which is underscored by this judgment, stating that the charging and machinery provisions contained in sections 9 and 195 of the Income Tax Act are interlinked . 57. The absurd consequence that the resident in India, after making the deduction/payment, would not then get any excess payment made by way of refund when regular assessment takes place, as the non-resident assessee alone would be entitled to such refund, is also pointed out in paragraph 18 of the judgment in GE Technology (supra). It was after keeping all this in view that this Court then set aside the judgment of the High Court of Karnataka dated 24.09.2009 and remanded the case to the High Court for a decision of the question on merits , i.e., on the sole question as to whether the ITAT was justified in holding that the amounts paid by the appellants to the foreign software suppliers did not amount to royalty, as a result of which, no liability to deduct TDS arose. .. . 117. The conclusions that can be derived on a reading of the aforesaid judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30 of the Copyright Act. vi) The right to reproduce and the right to use computer software are distinct and separate rights, as has been recognized in SBI v. Collector of Customs, 2000 (1) SCC 727 (see paragraph 21), the former amounting to parting with copyright and the latter, in the context of non-exclusive EULAs, not being so. 118. Consequently, the view contained in the determinations of the AAR in Dassault (AAR) (supra) and Geoquest (AAR) (supra) and the judgments of the High Court of Delhi in Ericsson A.B. (supra), Nokia Networks OY (supra), Infrasoft (supra), ZTE (supra), state the law correctly and have our express approval. We may add that the view expressed in the aforesaid judgments and determinations also accords with the OECD Commentary on which most of India s DTAAs are based. 168. Given 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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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