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TMI Blog2011 (5) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, application or employment of equipment for the desired purpose. Thus payment was not royalty within the meaning of Article 12(3)(b) - in favour of assessee. - IT APPEAL NO. 2428 (MUM.) OF 2009 - - - Dated:- 27-5-2011 - N.V. VASUDEVAN, RAJENDRA SINGH, JJ. Dhanesh Bafna and Ms. Sheetal Bandekar for the Appellant. Ms. Malathi Shridharan for the Respondent. ORDER Rajendra Singh, Accountant Member. This appeal by the assessee is directed against the order dated 30-1-2009 for the assessment year 2005-06. The only dispute raised by the assessee is regarding taxability of Rs. 12,92,68,070 receivable from the assessee from Standard Chartered Bank (SCB) as royalty. 2. Briefly stated facts of the case are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a PE in India, income was not taxable. CIT(A) however, did not accept the contentions raised. He agreed with the finding of Assessing Officer that it was a case of renting out of disc space in the hardware system and embedded software by the assessee in favour of SCB India and therefore, the income earned by the assessee was of the nature of royalty within the meaning of Article 12(3) of DTAA and also within the meaning of clause (iii) of Explanation (2) below section 9(vi) of the Income-tax Act. He therefore confirmed the order of Assessing Officer assessing the amount as royalty. Aggrieved by said decision the assessee is in appeal before Tribunal. 4. Before us ld. AR for the assessee at the very outset pointed out that the same issue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the desired purpose. The customer must come face to face with the equipment, operate it or control it or control its functions in some manner. If an advantage was taken from sophisticated equipment installed and provided by another person it could not be said that the recipient/customer used the equipment as such. Even where an earmarked circuit was provided for offering the facility, unless there was material to establish that the circuit/equipment could be accessed and put to use by means of some positive acts, it did not fall within the category of royalty. The Tribunal held that in this case, the assessee did not have the right to access the computer hardware except for transmitting raw data for further processing. The assessee had n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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