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TMI Blog2022 (4) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation technology. The Assessee has provided sale of off the shelf software and provision for connectivity/lease line internet with security feature etc. during the year under consideration from outside India. 3.1 The Assessee had filed its return of income electronically on dated 30.09.2009 by disclosing an income of Rs. 617,543,077/-. The case of the Assessee was selected for scrutiny and the AO issued the notice dated 03.08.2011 u/s 143(2) of the Act, which was replied by the Assessee by filing information and documents in the assessment proceedings and therefore, on the basis of information and documents furnished, the AO passed the order u/s 144C/143(3) of the Act on dated 02.05.2013 by making additions of Rs. 1,14,09,24,658/- on account of income from sale of off the shelf software and of Rs. 15,01,19,737/- on account of income from connectivity/lease line. 4. Aggrieved by the said additions made by the AO, the Assessee preferred first appeal before the Ld. Commissioner who vide impugned order deleted the said additions. 5. The Revenue department being aggrieved by impugned order, preferred the instant appeal and raised the following grounds of appeal:- "1. Whether on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various judgments passed by Hon'ble Apex Court and High Courts as well and observed that the right to reproduce and right to use computer software are distinct and separate rights, as has been recognized in State Bank of India Vs. Collector of Customs (2001) 1 SCC 727, the former amounting to parting with copyright and latter in the context of non-exclusive EULAs, not being so. 7.3 As in the instant case, the customers of the Assessee have been given right to reproduce the software and therefore, payment to the Assessee would constitute the 'royalty'. The customers of the Assessee are not only getting the right to make photo copies but also getting authority to make multiple copies and to make payment on copy basis and therefore, the judgment of the Hon'ble Apex Court supports the case of the revenue. 7.4 It was further contended by the ld.DR that the Assessee is not a reseller of computer software but it has given the customer a right to make copies and therefore the Assessee acted as 'principal' or as an 'agent' of the software manufacturer. Therefore, payment made by the customers from India to the Assessee constitutes 'royalty' and thus the determination by the Ld. Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue more or less is that transaction of sale of computer software to its customers implicit involved making of multiple copies of the software clearly indicates 'transfer of copyright' and therefore the consideration received qua said transactions amounts to "royalty" as per the Act and DTAA. 9.1 The Assessee on the contrary claimed that the Assessee purchasing the software from 'Microsoft company' and as per terms of the agreement with 'Microsoft' having no right to reproduce or to make any change in 'off the shelf software' and therefore, the question of passing a right by the Assessee to its customers does not arise. 9.2 We observe, recently the Hon'ble Apex Court in para no 173 of its judgment in the case of Engineering Analysis Centre of Excellence Pvt. Ltd (supra), clearly held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software. 9.3. The jurisdictional Hon'ble High Court recently in the case of CIT (International ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, non-resident suppliers to resident Indian distributors or end-users. Xxxx xxxx xxxx 97. The AAR then reasoned that the fact that a licence had been granted would be sufficient to conclude that there was a transfer of copyright, and that there was no justification for the use of the doctrine of noscitur a sociis to confine the transfer by way of a licence to only include a licence which transferred rights in respect of copyright, by referring to explanation 2 to section 9(1)(vi) of the Income Tax Act. It then held: "Considerable arguments are raised on the so called distinction between a copyright and copyrighted articles. What is a copyrighted article? It is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licencee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic manifestation of a programme, but also the use of or the right to use the copyright embedded therein. That apart, the Copyright Act or the Income-tax Act or the DTAC does not use the expression 'copyrighted article', which could have been used if the intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. 174. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed." 5. Further, this Court on similar facts has allowed writ petitions filed by the similarly placed assessee in EY Global Services Limited vs. Assistant Commissioner of Income Tax &Anr, W.P.(C) 11957/2016 and EYGBS (India) Private Limited vs. Joint Commissioner of Income Tax & Ors., W.P.(C) 12003/2016. The relevant portion of the said judgment is reproduced herein below:- "...13. A reading of the above judgment would clearly show that for the payment received by EYGSL (UK) from EYGBS (India) to be taxed as 'royalty', it is essential to show a transfer of copyright in the software to do any of the acts mentioned in Section 14 of the Copyright Act, 1957. A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Income Tax Act, 1961 and the India-UK DTAA." 6. Since, the issue of law raised in the present appeals has been conclusively decided in the favour of the assessee by the Supreme Court, no substantial question of law arises for consideration in the present appeals. It is also pertinent to mention that the appellant had admitted before the ITAT that the dispute in question had been decided in favour of the assessee by the Tribunal in earlier years. Accordingly, the present appeals are dismissed. {highlighted by us} 7. At this stage, learned counsel for the appellant states that there are other connected appeals pending before this Court. Registry is directed to list the connected appeals being ITA Nos.203/2017, 267/2017, 940/2019, 942/2019, 943/2019, 419/2019, 432/2019 and 611/2019 on 23rd March, 2022." 9.3 Theidentical issue as involved in the instant Ground, has already been elaborately discussed and decided, by the Hon'ble Apex court in the case of EngineeringAnalysis Centre of Excellence Pvt. Ltd (supra), and decision of the same has been followed by the jurisdictional High Court in the cases referred above, thus we do not haveany hesitation to dismiss the Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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