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TMI Blog2016 (5) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of AMS fees in the following AY and TDS was made accordingly. Hence, we direct the AO to verify the same and, if found proper, it may be allowed. Needless to say that assessee may be given proper opportunity of being heard X X X X Extracts X X X X X X X X Extracts X X X X ..... elaborately in his order with various case laws as well as referring to the DTAA dismissed the ground of appeal of assessee by holding as under: 6.15 It is clear from the above said analysis of the facts of the case, the DTAA, Income Tax Act, Copyright Act and judicial verdicts that the payment would constitute 'royalty' within the meaning of Article 12(3) of the DTAA and the provisions of 9(1)(vi) of the Act. The definition of 'royalty' under clause 9(1)(vi) of the Act is broader than the definition of 'royalty' under the DTAA. It is clear that the payment made by the appellant to the non-resident supplier would amount to royalty. In view of the said finding; it is clear that there is obligation on the part of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hardware key or the soft key in relation to the above software is directly provided by the AE to the users/ clients in India. • Further, the End User License Agreement ('EULA'), needs to be accepted by the customer directly before installing the software on its machine. • The appellant does not have any access to either the source code or into the actual programming codes present in the software product. • Neither the appellant nor the end user customers in India obtain any right to use or make copies of the software. • The appellant is a distributor simplicitor, distributing software for margin and also render installation and training services to Indian Customers for using the software products for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether payments to the assessee towards purchase of software could amount to royalty, the Hon'ble ITAT by its order in ITA No 1736/Hyd/2012 dated January 6, 2012 appreciated the facts put forth by the assessee and remanded the matter back to the Ld. AO to reconsider the issue and verify the facts to determine the taxability of software payments after taking into account the judgment as laid down by the Honble Delhi High Court in the case of Dynamic Vertical Software India Pvt. Ltd (332 ITR 222) (Del). Accordingly, the Ld. AO has by his order dated February 23,2015, after considering the facts involved with respect to the payments by the assessee towards purchase of software products, accepted the contentions of the assessee that such pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the orders of revenue authorities. On record, it is clear that in the AYs 2007-08 and 2008-09, the AO passed order confirming the transaction as purchase and not as royalty. At the same time, in the present cases under consideration, AO has taken a different view by confirming the transactions with 'AE' as "royalty" and rejected the contention of assessee. It is clear that the revenue has taken distinct view on the similar transaction. 9.1 In the case of 'AE' i.e. Energy Solutions International Inc. (ESI Inc.), the coordinate bench of this Tribunal has already confirmed this transaction as 'purchase' and dismissed the revenue's contention that these were 'royalty' after analyzing the business module of "AE". The relevant observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions can only be treated as 'purchase of software'. Accordingly, the grounds raised on this issue are allowed in all the appeals under consideration. 10. In AY 2010-11 being ITA No. 42/Hyd/2016, there is another ground raised by the assessee, which is as follows: 1. Disallowance towards payment made towards fees for annual maintenance services amounting to ₹ 3,96,352/-. 11. As regards disallowance towards payment made towards fees for annual maintenance services, the AO made an observation that the tax was not deducted on technical services rendered by the nonresidents to the assessee company as indicated in the tax audit report at Col. No. 17(f). He, therefore, added the amount of ₹ 3,96,352/- to the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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