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TMI Blog2017 (7) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ain reading of the Agreement. Neither do we find any hidden or deeper meaning in the Agreement which would indicate transfer of intellectual property right. The royalty paid by the appellant to their holding company in USA towards the that receipt and use of software does does not fall under the 'Intellectual Property Service' - the demand raised by the Revenue was set aside - appeal allowed - decided in favor of appellant. - ST/764/12 - A/87555/17/STB - Dated:- 30-5-2017 - Shri Ramesh Nair, Member (Judicial) And Shri Raju, Member (Technical) Shri Prashant Patankar, Consultant for Appellant Shri B. Kumar lyer, Supdt. (A.R.) for respondent ORDER Per: Ramesh Nair The fact of the case is that the appellant have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue in hand wherein the following order was raised. 4 To appreciate the context of the arrangements between Fluent Inc. USA and the appellant, we straightaway refer to the relevant clauses of the Agreement as below: 1. FIndia, a Company registered in India, is a wholly owned subsidiary of FI, with an authorized share capital of ₹ 20,000,000 divided into 2,000,000 ordinary shared of ₹ 10 each. 3. FI and Flndia have an agreement whereby Flndia develops the software and extend the services of trained and qualified personnel for testing, documentation and use of Computational Fluid Dynamics software, under the guidance and instructions provided by Fl. FI and Flndia have entered into an Agreement on July 26, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach such Sublicensee must be bound to said agreement. Any modifications to this Software License Agreement must be agreed to in writing by FI. 5.3 Any or all computer software and other products pertaining to the products covered under this agreement developed by Flndia shall be the exclusive property of Fl. 6. Trade Names and Trade Marks 6.1 FI hereby authorizes and requires Flndia to retain markings, colors, or other insignia that are affixed, at the time of FI s shipment, to any FI products or third party software products provided by Fl. No non-FI products sold by Flndia may bear FI markings or colors. 7.4 Flndia shall be responsible for the security of the Products and for the assurance that those sublicensed comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the software product or any portion there of is transferred to the appellant. The appellant is granted a non-exclusive, non-transferable licence to use the software products solely for their own use. The appellant is not allowed to sell, transfer, disclose any software product or copies thereto others. The Commissioner has read into the language of the Agreement to conclude that the appellant have provided service under the intellectual property service . Therefore, it is necessary to see the statutory provisions relating to intellectual property services. The relevant provisions are Section 65 (105) (zzr), Section 65 (55a) Section 65 (55b) are read as under: 65 (705) (zzr) -Taxable service means service provided to any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning given by the Commissioner for holding that the service is not covered under copyright service is very vague. He simply brushes aside the contentions of the appellant by stating that meaning of copyright covers literary, dramatic or musical work or computer programme but the appellant's activity is development of software marketing, distribution and sale of the software. The reasoning is incomprehensible to us. Anyway this issue does not require attention from our side because copy right, in any case, is excluded from the scope of intellectual property right under Section 65 (55a). 5.1 The Commissioner goes on to conclude in para 18 of the impugned order that the services provided is intellectual property service witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellectual property right. This is the basic flaw in the entire proceedings and shows complete lack of appreciation of the statutory provisions. Therefore, the order deserves to be set aside on this ground alone. 6. However, as the Commissioner has referred to the clauses of the Agreement and vaguely describes the appellant s activities as amounting to transfer of intellectual property or use of intellectual property right, we may look at the specific clauses. We find that the appellant are a wholly owned subsidiary of Fluent Inc. USA It can hardly be expected that a company will transfer its intellectual property right to its wholly owned subsidiary. Specific clauses of the Agreement clearly show that the appellant cannot disclose tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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