Software licence, maintenance, technology services and connectivity payments held not "royalty"; Revenue appeal dismissed under India-UK DTAA.

Whether receipts for software licence and maintenance, global technology services, and connectivity constituted "royalty" taxable in India under the IT Act and the India-UK DTAA was the dominant issue. Applying the HC ruling in the taxpayer's own case and the SC decision in Engineering Analysis, the Tribunal held that payments for use of copyrighted articles/standard software and related services, without transfer of copyright or rights in the copyright, do not fall within "royalty" under domestic law or the DTAA. Consequently, the CIT(A)'s finding that the impugned receipts were not taxable as royalty was upheld and the Revenue's appeal was dismissed.

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Issues Involved:
1. Taxability of amounts received by EYGBS(UK) for providing Bundle of Software hosted on Common Platform to its Associate Group Entities.
2. Requirement of transfer of copyright in software for taxing amounts received by EYGBS(UK) from EYGBS(India) as Royalty.
3. Applicability of SC judgement in Engineering Analysis Centre to amounts received by EYGBS(UK) from its Member Firms.

Summary:

Issue 1: Taxability of Software Bundle Amounts
The Revenue questioned whether amounts received by EYGBS(UK) for providing a Bundle of Software to its Associate Group Entities are covered under the SC judgement in Engineering Analysis Centre. The Tribunal upheld the CIT(A)'s decision that these amounts are not taxable as royalty under the IT Act and India-UK DTAA, following the SC judgement in Engineering Analysis Centre and the Delhi High Court's decision in the assessee's own case.

Issue 2: Transfer of Copyright Requirement
The Revenue contended that the transfer of copyright in software is essential for taxing amounts received by EYGBS(UK) from EYGBS(India) as Royalty. The Tribunal affirmed that the amounts are not taxable as royalty, as the agreements did not involve any transfer of copyright, aligning with the SC judgement in Engineering Analysis Centre and the Delhi High Court's ruling.

Issue 3: Applicability of SC Judgement
The Revenue argued that the SC judgement in Engineering Analysis Centre does not apply to amounts received by EYGBS(UK) from its Member Firms, as there was no direct transfer of Off the Shelf Software from Third Party Vendor to End User. The Tribunal dismissed this argument, stating that the payments are not royalty under the IT Act and India-UK DTAA, based on the SC judgement and the Delhi High Court's decision in the assessee's case.

Conclusion:
The Tribunal found no infirmity in the CIT(A)'s order, which followed the decisions of the Delhi High Court and the SC in Engineering Analysis Centre, and held that receipts towards software license and maintenance charges, global technology charges, and GWAN connectivity charges are not royalty. Consequently, the appeals of the Revenue were dismissed.

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