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2022 (4) TMI 1061 - ITAT PUNEIncome deemed to accrue or arise in India - Receipt towards software license fees as “Royalty” within the meaning of Article 12 of the India-Netherlands Double Taxation Avoidance Agreement - HELD THAT:- While dealing with the identical issue in the case of the assessee for the A.Y. 2013-14 has observed that the appellant company granted the software license fee on non-exclusive non-transferable basis during the license term. While deciding the issue in favour of the assessee the Tribunal found that the subject software is standard software not customized software. The title, the ownership and all rights in patents, copyrights and trade secrets and other software contained does not get transferred to the customer. The Courts as well as OECD commentary on Article 12 of the DTAA recognized the distinction between “copyrighted article” and “copyright right” in the programme and software which incorporates a copy of the copyrighted programme. Any payment made for acquisition of copy of the software is held not to be Royalty. In the light of the judgment of Hon’ble Supreme Court [2021 (3) TMI 138 - SUPREME COURT] and respectfully following the decision of the Tribunal [2022 (1) TMI 281 - ITAT PUNE] for the immediately preceding assessment year, we hold that fee for grant of software license cannot be taxed in India. Since we have held that the subject transaction of receipt of consideration for grant of software license is not Royalty under the provisions of Income Tax Act, 1961, the question of considering under the provisions as per DTAA between India and Netherland does not arise. Thus, ground of appeal No.1 filed by the assessee stands allowed. Direction of the DRP directing the A.O to bring to tax software maintenance, consulting service fees, Training fees, other services within the meaning of Article 12(5)(a) of the India and Netherland Treaty - D.R.P held that the receipts of the assessee from software maintenance fees, consulting services, training fees and other services are chargeable to tax as fee for Technical Services as per Article 12(5)(a) of India and Netherland treaty - Assessee submitted that the question of treating the above consideration as fees for technical services does not arise as the consideration received towards software licence fees cannot be considered as “Royalty” as per para4 of Article 12 of DTAA. - HELD THAT:- In the absence of any distinguishing facts and respectfully following the precedent, we hold that software maintenance fees, consulting service fees, and other services cannot be held to be “Fees for technical services”. Short credit of deduction of tax at source - HELD THAT:- This ground of appeal is restored to the file of the A.O with a direction to allow tax as per information contained in form No. 26AS. Thus, this ground of appeal is allowed for statistical purposes.
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