9911796707
TMI Blog2022 (6) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... software embedded in the hardware, qualify as royalty under the Income Tax Act (ITA) as well as various Double Taxation Avoidance Agreements (DTAAs)? - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] answered in terms of following the Hon ble Supreme Court referred to the terms of the agreements entered into with various parties for the use of software and noted that distributors were granted a non-exclusive and non-transferable license to resell the software. Furthermore, end users were granted a limited right to use the software without any right to sub-license, transfer, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court distinguished its earlier decision in the case of PILCOM on the grounds that in that ruling, the SC was concerned with payments to NR sportspersons and the withholding provisions in respect of such persons were governed by different provisions of the ITA which were not linked to the chargeability of income. Accordingly, respectfully following the precedent from the Hon ble Supreme Court as above, we set-aside the orders of the authorities below and decide the issue in favour of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the Appellant from its customers was not to be measured with reference to the productivity or use of the software, it could not be construed as 'royalty'. 6. That the learned AO/DRP erred in not following decision delivered by the jurisdictional High Court and this Hon'ble Tribunal, and the Authority for Advance Ruling on the issues arising in the Appellant's case. 7. That the learned AO/DRP erred in classifying the consideration received by the Appellant towards maintenance and technical support services/ancillary support services as fees for technical/included services under Article 12 of the DTAA. 8. That without prejudice, the AO erred in treating the entire amount of Rs. 3,51,92,160 as income from royalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end customers in India. The AO noticed that assessee has not offered this amount to tax in its return of income. Vide notice issued u/s. 142(1) of the I.T. Act, 1961 on different dates, assessee was asked to explain nature of its revenue received in India and how the same is not taxable in India. In this regard, assessee furnished a reply through ITBA e-assessment module and contended that in view of the provisions of India-USA DTAA assessee's income from sale of software is not taxable in India. The assessee further submitted that there is no change in the factual matrix as compared to earlier AY's. The assessee also placed reliance on various judgments in support of its claim. Assessee also discussed various provisions of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere granted a non-exclusive and non-transferable license to resell the software. Furthermore, end users were granted a limited right to use the software without any right to sub-license, transfer, reverse engineer, modify or reproduce the software, in this light, the Hon'ble Supreme Court examined various provisions of the Copyright Act, 1957 in force in India (ICA) and held that a limited right to use the software, make copies of the software for the purpose for which it was granted and without grant of rights of the copyright owner (such as reproduction, issuing copies, commercial exploitation), does not qualify as grant of a copyright under the ICA. 6. The Hon'ble Supreme Court noted that the definition of royalty under the ITA, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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