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TMI Blog2022 (9) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... e, such a usage will not relate back to change the nature of transaction from the sale of product to the sale of copyright. Facts of the case involved in this matter are squarely covered by the decision in the case of Engineering Analysis Centre Of Excellence (P) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] . We, therefore, while respectfully following the same hold the issue in favour of the assessee and inasmuch as such payments do not result in any income taxable in India, the person referred to in section 95 of the Act is not liable to deduct any tax under section 195 of the Act. We, therefore, hold that the remittances made by the assessee to GEISA towards use of Pro-E software or Global Web are not royalty income chargeable to tax under the Act as well as under the treaty and consequently the assessee cannot be treated as an assessee-in-default under section 201 of the Act for non-deduction of taxes under section 195 of the Act. Grounds of appeal are accordingly allowed. - ITA Nos. 272/Hyd/2012 And 273/Hyd/2012 And 274/Hyd/2012 - - - Dated:- 22-9-2022 - Shri Rama Kanta Panda, Accountant Member And Shri K.Narasimha Chary, Judicial Member For the Assessee : Shri Sachit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Assessing Officer, assessee preferred an appeal before the Ld. CIT(A) and submitted that they did not purchase the copyright or copyrighted article, but only a standard software which does not contain any element of proprietary knowledge which could be re-used; and that the payments were made for the purchase of goods which cannot be taken as royalty. Assessee referred to the terms of agreement, entered into with the vendors of the software, in support of their contention that what was granted and agreed to grant to the assessee was a non-exclusive and non-transferrable right to use the software without further right either to distribute or to copy the software or the source code therein, it does not give rise to any royalty. 4. Ld. CIT(A) on an appraisal of the contentions raised by the assessee in the light of the agreements and case law on this aspect observed that Pro-E software purchased by the assessee is a complete mechanical machine and assembly designing product, develops 3D design concepts, detailed drawing generation, system validation, development of manufacturing tools, used to generate new design concept and to analyse the design feasibility apart from checking p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd user/distributor to non-resident computer software manufacturers/suppliers, as consideration for resale/use of computer software through EULAs/distribution agreement, is not payment of royalty for use of copyright in computer software, and thus, same does not give rise to any income taxable in India. 7. Per contra, while placing reliance on the orders of the authorities below learned DR submitted that the software involved in this matter is a replacement for not only the instructions but also the export services and, therefore, the authorities rightly held that the payments made for the use of this particular sort of software amounts to royalty. 8. We have gone through the record in the light of the submissions made on either side. It could be seen from the impugned order that the Ld. CIT(A) referred to the agreement between the GEC in the United States and various vendors of the software, which the GEC made available to the group company s worldwide. Insofar as the Pro-E software is concerned, it is a standard 3D software product owned by Parametric Technology Corporation (PTC), US that helps in developing design concepts, detailed drawings generation, system validation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consent of any other person. 10. Nothing could be more clear that the contents of the agreement referred to above to show that PTC is the sole owner of the Pro-E software and GEISA/GEIE only has limited right to use the software subject to the conditions stipulated in the agreement. There is no sale of copyright of software, but the sale is only in respect of the rights to use the software and not the right to the code in itself. When once the transaction is very clear that no copyright of the software is sold but only the rights to use the software were sold without impacting any rights to the source code, merely because the assessee puts it to a particular use, such a usage will not relate back to change the nature of transaction from the sale of product to the sale of copyright. 11. As a matter of fact, at paragraph No. 4.9, Ld. CIT(A) in no unequivocal terms observed that the main software purchased was the Pro-E software. When once the software is purchased for a particular usage under a non-transferable and non-exclusive grant of license, by no stretch of imagination could be said that any payment made for the usage of software could be royalty. Engineering Analysis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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