TMI Blog2023 (11) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the agreement and the agreements are also not available, therefore, these companies may be taxed in the hands of the assessee as royalty - we direct the AO to consider revenue from these two companies as royalty and tax as per the relevant provisions of the Act. Receipts for use of telecom bandwidth facility - considered as royalty and /Fees for technical services - India-Singapore DTAA - HELD THAT:- As decided in Planetcast International Pvt Ltd [ 2023 (8) TMI 30 - ITAT DELHI ] no corresponding amendment in line with the amendment brought to section 9(1)(vi) of the Act has been made to Article 12(3) of India-Singapore DTAA. Therefore, in absence of any such amendment widening the scope of expression royalty under the treaty provisions, the amendment made to section 9(1)(vi) of the Act cannot be automatically brought or imported to Article 12(3) of India- Singapore DTAA, as the treaty provisions have to be construed strictly in accordance with the language used in the provision. Thus, we hold that the receipts from internet bandwidth charges cannot be treated as royalty income under Article 12(3) of India-Singapore DTAA. Accordingly, we direct the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re res integra as the quarrel has been settled by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt Ltd 432 ITR 471, which has been followed by this Tribunal in assessee s own case in A.Ys 2009-10 and 2010-11 in ITA Nos. 3209 3210/DEL/2018. The relevant findings read as under: 9.2 We observe, recently the Hon ble Apex Court in para no 173 of its judgment in the case of Engineering Analysis Centre of Excellence Pvt. Ltd (supra), clearly held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software. 9.3. The jurisdictional Hon ble High Court recently in the case of CIT (International Taxation) Vs. GRACEMAC CORPORATION {ITA No. 32/2022 decided on 07.03.2022} wherein, the Assessee was also holding the licensing of software products of Microsoft company in the Territory of India and selling to its customers in India, dealt with the identical issue as involved in the instant cases and while rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sociis to confine the transfer by way of a licence to only include a licence which transferred rights in respect of copyright, by referring to explanation 2 to section 9(1)(vi) of the Income Tax Act. It then held: Considerable arguments are raised on the so called distinction between a copyright and copyrighted articles. What is a copyrighted article? It is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licencee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic manifestation of a programme, but also the use of or the right to use the copyright embedded therein. That apart, the Copyright Act or the Income-tax Act or the DTAC does not use the expression copyrighted article , which could have been used if the intention was as claimed by the applicant. In the circumstances, the distinction sought to be made appears to be illusory. 98. This ruling of the AAR flies in the face of certain principles. When, under a non-exclusive licence, an end user gets the right to use computer software in the form of a CD, the end-user onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed. 5. Further, this Court on similar facts has allowed writ petitions filed by the similarly placed assessee in EY Global Services Limited vs. Assistant Commissioner of Income Tax Anr, W.P.(C) 11957/2016 and EYGBS (India) Private Limited vs. Joint Commissioner of Income Tax Ors., W.P.(C) 12003/2016. The relevant portion of the said judgment is reproduced hereinbelow:- 13. A reading of the above judgment would clearly show that for the payment received by EYGSL (UK) from EYGBS (India) to be taxed as royalty , it is essential to show a transfer of copyright in the software to do any of the acts mentioned in Section 14 of the Copyright Act, 1957. A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a transaction is to authorise the enduser to have access to and make use of the licenced software over which the licencee has no exclusive rights, no copyright is parted with and therefore, the payment received cannot be termed as royalty . 14. In the present case, the EYGBS (India), in terms of the Service Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had admitted before the ITAT that the dispute in question had been decided in favour of the assessee by the Tribunal in earlier years. Accordingly, the present appeals are dismissed. {highlighted by us}. 8. Respectfully following the decision of the co-ordinate bench which has followed the binding decision of the Hon'ble Supreme Court [supra], this grievance is partly allowed in favour of the assessee for the reasons mentioned hereinabove. 9. Before parting with this issue, it would be pertinent to refer to the revenue from sale of off the shelf software to two new companies which were not there in the earlier A.Ys, namely, Mphasis Finsource Ltd and Mphasis Software and Services [India] Limited. Since the ld. counsel for the assessee has fairly conceded that the revenue from these two companies are not covered by the agreement and the agreements are also not available, therefore, these companies may be taxed in the hands of the assessee as royalty. 10. On such concession, we direct the Assessing Officer to consider revenue from these two companies as royalty and tax as per the relevant provisions of the Act. 11. Second grievance in A.Y 2011-12 relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i-Trib.). 42. Learned Departmental Representative strongly relied upon the observation of the Assessing Officer and learned DRP. 43. We have considered rival submissions and perused materials on record. Undisputedly, referring to the amended provisions of section 9(1)(vi) of the Act, the Assessing Officer has treated the receipts from internet bandwidth charges as equipment/process royalty. However, it is observed, no corresponding amendment in line with the amendment brought to section 9(1)(vi) of the Act has been made to Article 12(3) of India-Singapore DTAA. Therefore, in absence of any such amendment widening the scope of expression royalty under the treaty provisions, the amendment made to section 9(1)(vi) of the Act cannot be automatically brought or imported to Article 12(3) of India- Singapore DTAA, as the treaty provisions have to be construed strictly in accordance with the language used in the provision. While coming to such view, we have found support from the ratio laid down in the decisions cited by learned Sr. Counsel for the assessee. Thus, for the aforesaid reasons, we hold that the receipts from internet bandwidth charges cannot be treated as royalty incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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