9911796707
TMI Blog2024 (6) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... from its group companies for use of various software shall not be taxable as Fee for Included Services ('FIS') / Fee for Technical Services ('FTS') under section 9(1)(vii) of the Act read with the Article 12 of India-Canada DTAA. 2.1. Based on the facts and circumstances of the case and in law, the receipts of the Appellant from GIT charges to its group companies for use of various software shall not be taxable as FTS / FIS as per beneficial provisions of Article 12(4) of the India-Canada DTAA, as the Appellant does not make available any technical knowledge, experience, skill, know- how, or processes or consist of the development and transfer of a technical plan or technical design under Article 12(4) of India-Canada DTAA. 2.2. Based on the facts and circumstances of the case and in law, the receipts of the Appellant from Indian group entities in relation to non-exclusive, non-transferrable licensed software (owner by third party vendors) shall not be taxable as decided by the Hon'ble Supreme Court in the case of Engineering Centre of Excellence Private Limited v CIT [2021] 125 taxmann.com 42 (SC). 2.3. The Appellant prays that the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal assessment order dated October 18, 2023, u/s 143(3) r.w.s. 144C of the Act and determined taxable income of the Appellant for AY 2021-22 making the addition of Rs.7,41,83,452/- being the amount cross charged from group companies for use of third- party software (GIT charges), alleging as FTS/ FIS under India- Canada DTAA. 8. Aggrieved, the assessee filed appeal before the Tribunal. 9. The ld. AR submitted that the assessee raised monthly invoices/ debit notes for amount cross charged for use of thirdparty owned software licenses i.e., Auto CAD software, Civil 3D, 3ds Max, etc. (GIT charges) from its group companies. The Appellant has enclosed the sample copies of debited notes and sample copy of agreement with group company. It was submitted that the licensor of the said software is third-party vendor and the SNC group companies merely use these software on need basis. 10. At the outset, it was argued that the debate whether the use of third-party software is Royalty under DTAA stands settled by the judgement of Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v The Commissioner of Income Tax & ANR (Civil Appeal Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to "make the technology available." The concept of 'make available' has been interpreted as transmitting the technical knowledge so that the recipient of service can derive an enduring benefit and utilize the technical knowledge or skill in future on his own without the aid of the service provider. In other words, to fit into the terminology "make available", the technical knowledge, skills etc. must remain with the person receiving the services even after the particular contract comes to an end. 16. Further, various judicial precedents have also dealt with the issue as to what constitutes make available, especially in light of the provisions of the India-USA DTAA and the MOU to the India-USA DTAA. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi) * Cummins Ltd., In re (2016) 283 CTR 241 (AAR - New Delhi) * Nielsen Company vs. Deputy Commissioner of Income Tax (2019) 109 taxmann.com 264 (Mumbai - Trib.) * EOS Power India (P.) Ltd. vs. Deputy Commissioner of Income Tax (2019) 108 taxmann.com 417 (Mumbai - Trib.) 19. Basis the above, it can be held that the assessee do not "make available" any technical knowledge, experience, skill, know-how or processes to group companies which may enable them to apply any technology contained therein without recourse to the Appellant. The amounts received as GIT charges is only for providing use of third-party software and is not in the nature of FIS as envisaged under Article 12(4)(b) of IndiaCanada DTAA. 20. We have considered as to whether the receipts can be considered as royalty as per Article 12 India-Canada DTAA has also been examined. 21. We find that the facts of the assessee are covered by the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Private Limited vs. CIT (CA Nos. 8733-8734 of 2018), the Hon'ble Supreme Court, after determining various clauses of EULA/ Distribution agreement held that payments made by the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
