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TMI Blog2024 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appeal No. 1655 of 2018 & connected matters) wherein this Court considering the authoritative pronouncement of the Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. Vs. Commissioner of Income Tax [2021] 125 taxman.com 42 (SC), had held that such payments which were made by the purchaser of the Software cannot be held to be royalty taxable under the provisions of Section 9 (1) (vi) of the IT Act. 3. In facts akin to the present case, this Court in the case of Commissioner of Income Tax (IT)-3 Mumbai Vs. M/s. Lucent Technologies GRL Ltd. (Income Tax Appeal (L) No. 3695 of 2018), which was Revenue's appeal against a foreign supplier, had dismissed the appeal filed by the Revenue by an order dated 1 July 2024. For convenience, we note the said order which reads thus:- "This is a batch of Appeals filed by the Appellant-Revenue against the Respondent-assessee, who is common in all these proceedings. 2. Income Tax Appeal (L) No.3695 of 2018 pertains to the assessment year 2006-07 and Income Tax Appeal (L) No.3693 of 2018 pertains to the assessment year 2010-11. Both these appeals arise from the common order passed by the Income Tax Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware is supplied to Reliance was not a customized software, but a software which was sold to several clients. The Assessing Officer did not agree with the assessee's case, and held that the supply of such software amounted to a transfer of intellectual property rights, and hence, the consideration paid to the assessee was in fact towards a license to use the software, as no title or interest in the software was transferable to the user. The Assessing Officer accordingly held that the transaction not being a sale of the software and being a payment received for the license to use such software, it was taxable as 'royalty' in terms of Section 9 (1) (vi) of the Act, read with relevant Article of the Double Taxation Avoidance Agreement ("DTAA") (i.e. Article 12 under the Indo-US DTAA and similar clauses in the other DTAA's) 9. As regards the assessee's claim for refund of the TDS, the Assessing Officer noted that Reliance had claimed refund of the tax as paid by it on such transaction, on the basis of an order passed by the Commissioner of Income-Tax (Appeals) ("CIT(A)") and hence, the claim of the assessee for refund of the amount be not entertained. Thus, the amount received by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assessee, and when the Court had come to a considered view that the payment for software which was supplied by the assessee was not liable to be taxed as 'royalty' under the provisions of Section 9 (1) (vi) of the Act, then certainly, the present assessee which had in fact supplied the software, cannot be treated differently and the same parameters of law would be required to be applied. 14. We find substance in the contentions raised by Mr. Pardiwalla that the question of law as raised by the Revenue in the present batch of appeals would stand covered by our orders in Income Tax Appeal No.1655 of 2018 and also a batch of appeals decided by us on 24th June, 2024 in Income Tax Appeal No.28 of 2018 and other connected appeals. For the sake of convenience, we note our order passed in Income Tax Appeal No.1655 of 2018 which reads thus:- "PC : 1. We have heard Mr. Suresh Kumar, Learned Counsel for the Appellant-Revenue and Mr. M. Agarwal, Learned Counsel for the Respondent. 2. At the outset, Mr. Suresh Kumar has stated that the Revenue would not have any objection for this Bench taking up the proceedings. 3. This Appeal of the Revenue assails an order dated 14th July, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, following the decision of its co-ordinate Bench, in assessee's own case, dismissed the appeal filed by the Revenue by the impugned order. 8. At the outset, Learned Counsel for the parties would fairly state that the question of law as raised in the present appeals, is no more res integra in view of the authoritative pronouncement of the Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. vs. Commissioner of Income Tax. In the said case the Assessing Officer, applying Article 12(3) of the DTAA entered between India and U.S.A. as also the provisions of Section 9 (1) (vi) of the IT Act ,to the transaction between the parties, held that the transaction involved copyright, which attracted the payment of royalty and accordingly, tax was required to be deducted at source by the Indian importer. Since this was not done, it was held that the assessee was liable to make good the payment of TDS which it had not deducted. Also interest under Section 201 (1) (A) of the Act was levied. The Appeal before the Commissioner was also dismissed. 9. In these circumstances, the proceedings had reached the Tribunal at the instance of the assessee. The assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions contained in the Income-tax Act (section 9 (1) (vi), along with explanations 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 posed before us, is 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, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. 170. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from the impugned judgments of the High Court of Delhi are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondent/assessee. In this view of the matter, we restore to the file of this Court all the appeals which came to be automatically dismissed by such orders passed by the Division Bench. 3. Office to accordingly take further appropriate steps to show these appeals as restored." 19. It is hence clearly seen from the aforesaid orders that this Court had come to the considered view that the question of law would in fact stand covered by the authoritative pronouncement of the Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. vs. Commissioner of Income Tax. 20. For the aforesaid reasons, no fault can be found in the orders passed by the Tribunal. The appeals would not give rise to any open question of law. They are accordingly dismissed. No costs." 3. It is therefore seen that from the aforesaid order passed by this Court in Lucent Technologies (supra), the Court not only considered the case of the purchaser of the software but also the supplier of the Software, when the Court in para 13 of the said order had observed that the assessee therein (Lucent Technologies) who had in fact supplied the software cannot be treated differently and s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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