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TMI Blog2021 (11) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Beena Pillai, Member (J) For the Appellant : Nageswar Rao, Advocate For the Respondents : Muzaffar Hussain, CIT (DR) ORDER Per Beena Pillai, Judicial Member Present appeal has been filed by assessee against the final assessment order dated 23.03.2021 passed by JCIT-Intl. Tax, Bangalore for A.Y. 2017-18. It is submitted that the only issue raised by assessee in this appeal relate to treating the receipts of assessee's on account of sale of software to the Indian customers, as royalty. 2. It was submitted that during the relevant year under consideration assessee was also engaged in sale of tangible hardwares like routers, switches, optical network, storage area networking and home networking hardware. Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for assessment year 2011-12, in ITA No. 7/2019 by order dated 26/03/2021 decided the issue in favour of assessee. i) it is the submission of Ld. Counsel that there is no change in terms and conditions of the agreement in the year under consideration also. He submitted that the assessee is not transferring any copyright, but granting only user license. ii) it has been contended that the decision rendered by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (supra) is followed by the co-ordinate bench in AY 2014-15, 2015-16 and 2016-17 and the same should be followed in this year also. 6. We have perused submissions advanced by both sides in light of records placed before us. 7. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deducted such proportion of tax as is required, that the consequences of a failure to deduct and pay, reflected in Section 201 of the Income Tax Act, follow, by virtue of which the resident-payee is deemed an assessee in default , and thus, is made liable to pay tax, interest and penalty thereon. This position is also made amply clear by the referral order in the concerned appeals from the High Court of Karnataka, namely, the judgment of this Court in GE Technology (supra). 47. In all these cases, the licence that is granted vide the EULA, is riot a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in Sections 14(a) and 14(b) of the Copyright Act, but s a licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise, and what the Indian publisher will pay for, is the right to reproduce the book, which can then be characterized as royalty for the exclusive right to reproduce the book in the territory mentioned by the licence. 52. There can be no doubt as to the real nature of the transactions in the appeals before us. What is licensed by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods, which, as has been correctly pointed out by the learned counsel for the assessees, the law declared by this Court in the context of sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid judgment delivered by the Hon'ble Supreme Court, the question of law framed in the present appeal is decided in favour of the assessee and against the revenue. 8. Similar view has been taken by the co-ordinate bench in IT(TP)A No. 2542/Bang/2018 2812/Bang/2017 order dated 02.07.2021. In the light of the above observations, and respectfully following the decision of Hon'ble Supreme Court, we are of the view that Ld. CIT(A) erred in treating the receipts from sale of software with the support services as royalty. Accordingly grounds raised by assessee stands allowed. 9. The assessee has filed additional grounds vide application dated 22/04/2021 in the assessment years under consideration, is stated to be not pressed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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