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TMI Blog2016 (1) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... onics India Ltd., Hyderabad [2014 (4) TMI 569 - ITAT HYDERABAD] the assessee has acquired a readymade off – the shelf computer programme to be used in their business and no right was granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be held as ‘royalties’ coming into the ambit of Article 12 of DTAA or ‘fee for technical services’ u/s 9(1)(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act. - Decided in favour of assessee. - ITA.No.1967 and 1968/Hyd/2014, ITA.No.210 and 211/Hyd/2015 - - - Dated:- 13-11-2015 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIAFAUR RAHMAN, ACCOUNTANT MEMBER For The Revenue : Mr. G. Surya Prasad For The Assessee : Mr. P. Murali Mohan Rao ORDER PER SMT. P. MADHAVI DEVI, J.M. The above appeals are cross-appeals of both Assessee as well as Revenue for the A.Ys. 2011-12 and 2012-13. 2. Brief facts of the case are as under:- The assessee, is engaged in the business of software development for US based Insurance companies; during the F.Y. 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee reiterated the assessee s submissions made before the authorities below and submitted that all the three issues are covered in favour of the assessee by the decision of this Tribunal in various cases. He has filed copies of the orders of the Tribunal before us. 5. The Ld. D.R., on the other hand, supported the orders of the authorities below on all the issues and also held that the Ld. CIT(A) has erroneously allowed the relief on account of band width charges even though they are in the nature of professional and technical services. 6. Having heard the rival contentions and the material on record, we find that on the issue of applicability of TDS provisions to Bandwidth charges, this Tribunal in the case of M/s. Ushodaya Enterprises P. Ltd., Hyderabad in ITA.No.1820 1821/Hyd/2014 and ITA.Nos.1858 1859/Hyd/2014 dated 24.04.2015 for the A.Ys. 2002-03 and 2003-04 at para-11 of its order has held as under : 11. As regards the issue involved in ground 4 relating to non-deduction of tax at source on payment of band width charges, learned representatives for both the sides have agreed that it is covered by the decision of the Tribunal dated 23.3.2012 in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icenses is concerned, we find that this issue is covered in favour of the assessee by the decision of A Bench of this Tribunal in the case of ADIT (Int. Taxation) vs. M/s. Batronics India Ltd., Hyderabad in ITA.No.918/Hyd/2010 dated 27.01.2014 wherein at para 38 to 49 of its order the Tribunal has held as under : 38. The Agreements show that the license is nonexclusive, non-transferable and the sof tware has to be used in accordance with the agreement. It is also stipulated that the copy so made shall include Intra Asia Trading (P) Ltd s copyright and other proprietary notices. All copies of the Sof tware are the exclusive property of Intra Asia Trading (P) Ltd.. The Sof tware includes a licence authorisation device, which restricts the use of the Sof tware. The sof tware is to be used only for Licensee_s own business as def ined within the Intra Asia Trading (P) Ltd. Licence Schedule. 39. In order to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright of a literary, artistic or scientif ic work. In order to treat the consideration paid by the Licensee as roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the sof tware product in favour of the licensee/customer is what is contemplated by the Treaty. Merely authorizing or enabling a customer to have the benef it of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using the copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co-extensive with the owner/ transferor who divests himself of the rights he possesses in his favour. 42. The license granted to the licensee permitting him to use the programme for its business purpose is only incidental to the facility extended to the licensee to make use of the copyrighted product for its internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively dif ferent from the right contemplated by the said paragraph because it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the def inition of royalty as given in the DTAA. What the licensee has acquired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to them to utilize the copyright of a computer programme and thus the payment for the same is not in the nature of royalty. 47. We have not examined the effect of the subsequent amendment to section 9 (1)(vi) of the Act and also whether the amount received for use of sof tware would be royalty in terms thereof for the reason that the Assessee is covered by the DTAA, the provisions of which are more benef icial. The amount received by the Assessee under the licence agreement for allowing the use of the sof tware is not royalty under the DTAA. 48. What is transferred is neither the copyright in the sof tware nor the use of the copyright in the sof tware, but what is transferred is the right to use the copyrighted material or article which is clearly ..... 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