9911796707
TMI Blog2023 (6) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Commissioner of Income Tax, Circle- 2(2)(1), International Taxation, New Delhi [hereinafter referred as the "AO"] and the Dispute Resolution Panel -2 [hereinafter referred as the "DRP"] are bad in law and void ab-initio [herein referred to as 'assessment order' and 'DRP order']. 1.1 That, on facts, and in law, the AO has erred in not providing an adequate opportunity of being heard to the Appellant, thereby violating principals of natural justice, while passing the final assessment order under section 143(3)/144C of the Act for the AY 2017-18. 2. That, on the facts, and in the circumstances of the case, and in law, AO / DRP have erred in holding / upholding that the consideration received by the Appellant from supply/distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, and in law, the AO has erred in not applying an independent mind with respect to the year under consideration and merely reproduced the observations made by the erstwhile AO in the final assessment passed under section 143(3)/144 of the Act for AY 2015-16. 7.1 That, the observations made by the AO in the impugned assessment order are merely based on conjectures and surmises, rather than on facts and circumstances of the Appellant, i.e. inter alia as under: (a) The AO has erred in observing from the content/information, downloaded from the global website of the Appellant, that the source code is provided to its customers by the Appellant and royalty would be paid when the revenues of such customers wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft, or for information concerning industrial commercial or scientific experience. According to the submissions made by the assessee, the payments received for sale of software, without allowing any right to use the copyright in the software, would not be covered within the scope of 'royalty' under the DTAA. The assessee also submitted that the parting of intellectual property rights is inherent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight that is transferred in the instant case is the transfer of copyright including the right to make copy of software for internal business, and payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to section 9(1)(vi). In any view of the matter, in view of the provisions of section 90, agreements with foreign countries (DTAA) would override the provisions of the Act. Once it is held that payment made by the assessee to the non-resident companies would amount to 'royalty' within the meaning of article 12 of the DTAA with the respective country, it is clear that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act (section 9(l)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 168. Our answer to the question posed before us, is that the amounts paid by resident India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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