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TMI Blog2017 (7) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the AO treating sale of Standard Software in the nature of Royalty. 2. Briefly stated, the facts of the case are that the assessee company is a Finnish Software Company incorporated and registered in Finland and is listed on the Helsinki Stock Exchange. It is a tax resident of Finland as per the provisions of Double Taxation Avoidance Agreement between India and Finland (DTAA/Treaty). The assessee is stated to develop, manufacture and deliver off the shelf mediation, charging and fulfillment solutions and software. The company s solution and software are being sold to the telephone operators who maintain and provide services in the Telecommunication Networks. The assessee company is stated to be a Global Market Player in providing convergent mediation software solutions. Comptel Solutions support the core business processes of operators and service providers by generating concrete savings that allow for new business models and sustained customer loyalty. The Comptel link product portfolio includes Comptel Event Link for event mediation and usage data management, Comptel Instant Link for automated user provisioning and service activation and Comptel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that it states certain facts (at internal page 13) of the assessee's case (highlighted / underlined below) which go against the very 'basis' and the 'grain' of the principles laid down in decision relied upon (that of Hon'ble HC in Infrasoft): 0.8. Intellectual Properly 8.1 Work made for hire All Developed Works, if any, belong exclusively lo Buyer or Customer and are works made for hire. If any Developed Works are not considered works made for hire owned by operation of law, supplier assigns the ownership of copyrights in such works to buyer or customer. 8.2 Preexisting materials Supplier will not include any Preexisting Materials in any Deliverable unless they are listed in the relevant SOW. For the sole purpose of supporting the Customer as expressly specified in the relevant SOW, Supplier grants Buyer a nonexclusive, worldwide, perpetual, irrevocable, paid-up, license to prepare and have prepared derivative works of such Preexisting Materials as have been prepared by it and to use, have used, execute, reproduce, transmit, display, perform, transfer, distribute, and sublicense such Preexisting Materials or their derivat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontradict or are distinguishable from the material facts in the case of Infrasoft decision (copy submitted to the bench). It is important to note that these facts (available in the said IT AT order itself) have not been discussed in the said decision of the Hon'ble ITAT. Instead, the contentions of the assessee have been merely listed / stated at Para 15 of the order without testing the facts (facts as highlighted / underlined above) against the facts and principles laid down by the Infrasoft decision. 7. These highlighted facts remain the same even in the present appeal of AY 2010 - 11 as can be seen from page 6 of the Assessment Order. 8. In the above regard, it is humbly submitted that the Hon'ble SC has held in Distributors (Baroda) (P.) Ltd [1985] 22 Taxman 49 (SC) that: 2. We have given our most anxious consideration to this question, particularly since one of us, namely, P.N. Bhagwati, J. as a party to the decision in Cloth Traders ( P.) Ltd.'s case (supra). But having regard to various considerations to which we shall advert in detail when we examine the arguments advanced on behalf of the parties, we are compelled to reach the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue. While coming to this conclusion, the Hon'ble High Court observed as hereunder (Please refer to page 2 of Paper Book): Quote The questions which the Revenue seeks to urge in these appeals under section 26oA of the Income Tax Act, 1961 ('the Act') are common, i.e., whether the amounts paid to the assessee by its licensors, amounted to royalty within the meaning of the expressions under Section g(i)(vi) and Article 12 of the Indo-Finland Double Taxation Avoidance Agreement (DTAA). The Income Tax Appellate Tribunal (ITAT) followed the previous judgements of this Court including the judgement in DIT Vs Infrasoft Ltd, 264 CTR 329 and also the judgementDIT(International Taxation) Vs Nokia Networks Oy, 25 Taxman.com 255 (Delhi). The later decision had an occasion to interpret the same provision in the context of very same treaty. Since, the ITAT has followed the previous binding judgment of this Court, the present appeals do not raise a substantial question of law. The Court is also satisfied that the application of law by the ITAT was sound and proper. The appeals are therefore dismissed. Unquote 3. It is pertinent to mention here that in AYs 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would also apply with equal force in the assessment years in question. It has been stated by the AO that there has been admittedly no change in the factual matrix or the business model of the assessee from earlier years and as such there was no reason to arrive at a different conclusion other than that as an earlier assessment years on the question as to whether the sale of software was to be charged as business income or as royalty. The Ld. AR has placed reliance on the decision of the ITAT Delhi B Bench in its own case for A.Ys. 2007-08, 2008-09 and 2009-10 on this issue and a perusal of the aforesaid order reveals that the reliance of the Ld. AR is well placed as the issue is squarely covered in favour of the assessee by the order of the ITAT, wherein the coordinate bench has discussed the issue at great length and has thereafter held in Paragraph 27 of the said order as under: 27. In view of this we allow ground no. 1 to 3 of the appeal of the assessee holding that sale of software by the assessee is a standard software which is chargeable to tax under Article 7 of DTAA as business income of the assessee and not under Article 12 as Royalty . The Revenue chall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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