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TMI Blog2021 (2) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... le in India as the assessee did not have any Permanent Establishment in India as decided in [ 2021 (2) TMI 508 - ITAT PUNE] Thus we hold the sale consideration received for sale of software products from the end users, distributors or resellers is business income and not Royalty income and as such it is not taxable in India. Thus, the final assessment order passed by the AO is set aside and ground raised by the assessee is allowed. - ITA Nos. 505 and 506/PUN/2020 - - - Dated:- 5-2-2021 - R. S. Syal, Vice President And S.S. Viswanethra Ravi, Member (J) For the Appellant : Nageswar Rao For the Respondents : Amrita Misra ORDER S. S. Viswanethra Ravi, Member (J) Both the appeals by the assessee filed against the common final assessment order dated 17-06-2020 passed by the Assessing Officer (AO) u/s. 143(3) r.w.s. 147 r.w.s. 144C(1) of the Act for assessment years 2012-13 and 2017-18. 2. We find that the issues raised in both appeals are similar, based on same identical facts. Upon hearing both the parties, we proceed to hear both the appeals together and to pass a consolidated order for the sake of convenience. 3. First, we shall take up the appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections of DRP held the said consideration from sale of software licenses as taxable as Royalty in India. 7. Before us, the Ld. AR, Shri Nageswar Rao submits that the issue raised in ground No. 1 is similar to the ground raised in ITA No. 2452/PUN/2017 in assessee's own case for A.Y. 2014-15. The Ld. AR in support of his contentions drew our attention to the grounds raised in Form No. 36 and the finding rendered by this Tribunal vide its order dated 11-01-2021 is squarely applicable to the issue raised in ground No. 1. 8. The Ld. DR, Smt. Amrita Misra fairly conceded that the issue raised before this Tribunal is similar and based on identical facts as that of in assessee's own case for A.Y. 2014-15. 9. Having heard both the parties and on perusal of order of Tribunal in assessee's own case for A.Y. 2014-15 in ITA No. 2452/PUN/2017, order dated 11-01-2021 we note that the assessee claimed revenue from sale of software licenses in India as not chargeable to tax in the absence of it having any permanent establishment in India. Further, it was explained that the software licenses sold by it were meant for internal business purpose of the users and not for commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and (b) payment of any kind received as consideration for the use of, or the right to use, the industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 or Article 8. 12. On going through the language of Article 12 defining the term 'Royalties', it is palpable that the same means a consideration for the use of, or the right to use, any copyright of a literary work etc. Selling or sub-licensing or transferring Copyright means assigning a right to copy the 'work' for commercial exploitation and not simply using the work for self consumption. Assigning a right to copy for commercial exploitation is different from the right to use the copy of the work for self purpose. Ex consequenti, giving a right to copy is a salient feature of the term 'Royalties' under the DTAA, which means that the licensee must acquire a right to copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the distributors the nonexclusive, non-transferable right during the Term to acquire and distribute Symantec Products to Resellers in the territory to allow such resellers to distribute Symantec Products to end-users . Para 1(c) of the Agreement further states that the: 'Distributor's appointment only grants to Distributor a license to transfer such Symantec Products to Distributor's customers, and does not transfer any right, title or interest in any such software to Distributor'. Clause 2 of the Agreement enumerates Obligations of Distributor . Para 2(g) states that: 'Distributor will distribute Symantec Product to resellers only under the terms of the end-user license agreement'. Para 5 of the Agreement deals with 'Prices, Per Copy License Fees and Payment'. It states that Symantec will invoice distributors on the basis of the Symantec buy price list for the Symantec Products. Para 5(g) deals with 'Appliances Return or Exchange'. It states that the: 'Distributor may exchange to Symantec a portion of the Appliance(s) which were shipped to Distributor hereunder during any calendar quarter during the term of this Agreement to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are confined to purchasing specific Symantec Products from the assessee and then eventually selling the same to the end customers in India. There is no qualitative difference between the direct sales made by the assessee to its customers in India, which have already passed the scrutiny by the Tribunal in assessee's own case for earlier year and the sales made by the assessee through the Distributors or the Resellers. In both the sets of circumstances, it is only one-to-one sale of the Symantec Products by the assessee and at no stage the right to use the copyright in the software is licensed either to the Distributor or the Reseller. Thus, the decision taken by the Tribunal in the context of direct sales made by the assessee to end customers in India applies with full force insofar as the sales through Distributors and Resellers are concerned. That being the position, we hold that the income earned by the assessee from sale of software, either directly to the customers in India or through Distributors or Resellers constitutes its business income and not the Royalty income. As admittedly the assessee did not have any Permanent Establishment in India, such income will not mag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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