TMI Blog2023 (10) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... essee : Shri Nikhil Tiwari, CA ORDER PER C.N. PRASAD, J.M. These three appeals are filed by the Revenue against the orders of the Ld.CIT(Appeals)-42, Delhi dated 24.02.2023 for the assessment years 2017-18, 2018-19 2019-20. The Revenue has raised the following common grounds in all these three appeals: - 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that amounts received by EYGBS(UK) for providing Bundle of Software hosted on Common Platform to its Associate Group Entities is covered under the law laid by SC in its judgement of Engineering Analysis Centre. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that for taxing amounts received by EYGBS(UK) form EYGBS(india) as Royalty, transfer of copyright in software is essential without considering the fact that transactions of assessee do not fall in four categories as mentioned in paragraph 4 of SC in its judgement of Engineering Analysis Centre. 3. Whether on the facts and in the circumstances of the case and in law, the Ed. CIT(A) is correct in holding that amounts received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011) dated 10 August 2016 is enclosed at page 1 to 36 of the paper book. 6. Against the said order of the AAR, the Respondent had filed a Writ petition before the Hon ble High Court Delhi (hereinafter referred as Hon ble Delhi HC ) seeking relief against the adverse ruling of the AAR on reimbursement of software license costs as well as GWAN and Global Technology costs which were held to be in the nature of royalty by Hon ble AAR. The Hon ble High Court Delhi granted the relief and held that reimbursement of software license costs as well as GWAN and Global Technology costs are not in the nature of royalty. Assessment Proceedings (During pendency of Writ Petition): 7. During the pendency of above Writ petition before the Hon ble Delhi HC, the Ld. AO framed the assessment for AY 2017-18 wherein it was held that Global Technology charges, GWAN connectivity charges and Software license and maintenance charges are in the nature of royalty basis the ruling of Hon ble AAR. Further, for AY 2018-19 and AY 2019-20, which assessments were made after the aforesaid decision of the Hon ble Delhi High Court, the Ld. AO in the assessment held that Global Technology charges, GWAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are set aside and it is held that the payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), does not amount to 'royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA. A copy of the Hon ble Delhi HC order dated 09 December 2021(WP No. 11967/2016) setting aside AAR s order is enclosed at Page 37 to 58 of the Paper Book for your Honor s reference. ITAT order for AY 2012-13 to AY 2015-16 9.2 The said fact has been duly considered by the Hon ble Delhi ITAT in its order passed for AYs 2012-13 to AY 2015-16 (ITA Nos. 7017 to 7020/Del/2019) dated 1 June 2022, whereby, the Hon ble ITAT had directed the Ld. AO to follow the order passed by Hon bie Delhi HC in favour of the Respondent. The relevant extract of the Hon ble Tribunal order is reproduced herein under: 11. Accordingly, upon careful consideration, we find that undoubtedly Hon ble Delhi High Court has reversed the order of AAR but the Hon ble High Court order was not in existence when the authorities below passed the order. Hence it would be appropriate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ruling of Hon ble AAR treated software license and maintenance charges received by the appellant of Rs. 12,32,61,326/- for giving right to use of computer software in the nature of royalty under the Act as well as India-UK DTAA. 8.2 It has been submitted that the appellant, being a central service provider, has entered into master license agreement with third party vendors like Microsoft, IBM Corp, Kontiki, etc. Pursuant to the said agreements, the appellant is permitted to enable access for use of software s to its Affiliates as well {tie. each. Affiliate does not own the license but is granted access to use it). It has been informed such software s are bundled together and loaded on servers located at places outside India and thereby a standard facility is created by the appellant so that all EY Member Firms use common software applications loaded on appellant s servers for easy integration and compatibility. It is contended that the payments received by the appellant are pursuant to right to access a bundle of software applications and not for any right to reproduce or make copies of these applications of make commercial use of the same; the appellant neither get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22, not taxed Software and Maintenance charges as income, the addition of Rs. 12,32,61,326/- is deleted. This ground is allowed. 9. Ground no. 4 is against treatment of Global technology charges and GWAN connectivity charges amounting to Rs. 9,61,53,543/- and Rs. 14,45,41,444/- respectively as royalty under the Act and the treaty. 9.1 It has been explained that Global technology charges include manpower support charges for development and maintenance of IT application and other related infrastructure cost including hardware cost and cost of servers etc. The GWAN Connectivity charge is about network connectivity; the office site gets connected to the network and the charges for the connectivity are based on bandwidth required by the office. 9.2 Relying upon the ruling of AAR, the AO taxed these charges as Royalty under the Act and India-UK DTAA. 9.3 As already discussed, the Hon ble Delhi High Court s in its order dated 09.12.2021 in WP(C) 11957/2016 CM 27602/2021 set aside the ruling of the AAR and the Hon ble Court held that the payment received by appellant for providing access to computer software to its members firms in India does not amount to Royalty l ..... 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