TaxTMI 
TaxTMI 
2013 (4) TMI 515
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....ereinafter referred to as 'the learned AO'). ii) That on the facts and in the circumstances of the case, the learned C1T(A) erred in not appreciating that the aforesaid receipt of Rs.32,51,18,194 represents merely proceeds on account of distribution of products, and is not for any transfer of intellectual property right contained in the copy right of the software. iii) That on the facts and in the circumstances of the case, the learned CIT(A) has erred in not appreciating that BEA retains ownership over the copyright in the software and BEA System India does not have any right to commercially exploit the copyright in the software." 3. From the above grounds, it transpires that the only grievance of the assessee relates to the action of the CIT(A) in confirming the view expressed by the AO in holding that the payment of Rs.32,51,18,194/- received from M/s.BEA Systems India Pvt. Ltd. on account of distribution of software product was royalty and hence the assessee was required to deduct tax at source and pay the same to the Government. 3.1. The facts as culled out from records are that the assessee, a non-resident Indian, filed return of income on 22-3-2010 declaring nil ....
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....hase of 'shrink-wrapped software' by Indian company to the assessee amounted to royalty and the AO was correct in treating the same as royalty. Accordingly, he confirmed the order of the AO. Still aggrieved, the assessee is on second appeal before us with the grounds of appeal extracted elsewhere of this order. 3.3. At the time of hearing, learned counsel for the assessee submitted that the point at issue has already been considered by the Tribunal in the assessee's own case for assessment year 2007-08 in ITA No.543/Bang/2011 dated 13-4- 2012. He also placed a copy of the order on record. By placing the same, he submitted that the Tribunal, for the earlier assessment year has dismissed the assessee's appeal on this issue by following the decision of the jurisdictional High Court in the case of M/s.Samsung Electronics Co. Ltd. & others vs. DCIT. He has also placed on record paper book containing the copy of agreement entered into between BEA Systems Inc. and BEA Systems India Pvt. Ltd., and the submissions made before the CIT(A) and the AO. 3.4 We have also heard the learned Departmental Representative and considered the facts and materials on record including the decision of ....
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....license is the license to use the software and copyright continue to be with the nonresident as per the agreement. Even as per the agreement entered into with the other distributors as also the end-user license agreement, it is clear that the distributor would get exclusive non-transferable license within the territory for which he is appointed and he has got right to distribute via resellers the Software, upon payment of the licenses set forth in Exhibit A to the agreement only to End Users pursuant to a valid Actuate shrinkwrap or other Actuate license agreement and except as expressly set forth in the said agreement, distributor may not rent, lease, loan, sell or otherwise distribute the Software the Documentation or any derivative works based upon the Software or Documentation in whole or in part. Distributor shall not reverse engineer, decompile, or otherwise attempt to derive or modify the source code for the Software. Distributor shall have no rights to the Software other than the rights expressly set forth in the agreement. Distributor shall not modify or copy any part of the Software or Documentation. Distributor may not use sub-distributors for further distribution ....
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....t to the respondent in India is only a shrink wrapped software/off-the-shelf software, which is not customized to suit the needs of the respondent, the said software is to be treated as goods and there is sale of the software and copy of the software. Therefore, the question of paying any royalty would not arise. In support of the said contention, the learned senior counsel appearing for the respondents has strongly relied upon the decision of the Hon'ble Supreme Court in Tata Consultancy Services' case (supra) (hereinafter referred to as the TCS's case), wherein the Hon'ble Supreme Court was considering the question as to whether the canned software sold by the appellants can be termed to be "goods" and as such assessable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957. Having regard to the broad definition of 'goods' under Section 2(h) of the said Act and also the provisions of Article 366(12) of the Constitution of India, the Hon'ble Supreme Court was pleased to answer the said question for determination by holding that once the 'information' or 'knowledge' is transformed into physical existence and recorded in physical form, it is corporeal property. The....
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.... of clause 3 of the DTAA, reference is to be made to the respective law regarding definition of 'Copyright', namely, Copyright Act, 1957, in India, wherein it is clearly stated that "literary work" includes computer programmes, tables and compilations including computer [databases]. Section 16 of the Copyright Act, 1957 states that no person shall be entitled to copyright or any similar right in any work, whether published or unpublished, otherwise than under and in accordance with the provisions of the said Act or of any other law for the time being in force, but nothing in this section shall be construed as abrogating any right or jurisdiction to restrain a breach of trust or confidence. Section 14 of the said Act dealing with meaning of 'Copyright' reads as follows:- "14. Meaning of Copyright. - For the purposes of this Act, "copyright" means the exclusive right subject to the provisions of this Act, to do or authorize the doing of any of the following acts in respect of a work or any substantial part thereof, namely: - (a) in the case of a literary, dramatic or musical work, not being a computer programme,- (i) to reproduce the work in any material form including th....
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....It may also be noted that under Section 51 of the Act dealing with "When Copyright infringed" states that Copyright in a work shall be deemed to be infringed - when any person, without a license granted by the owner of the Copyright or the Registrar of Copyrights under the Act or in contravention of the conditions of a license so granted or of any condition imposed by a competent authority under the Act: does anything, the exclusive right to do which is by the Act conferred upon the owner of the Copyright. Section 52 of the Act dealing with Certain acts not to be infringement of copyright states that the following acts shall not constitute an infringement of copyright, namely- "xxxx (aa) the making of copies or adaptation of a computer programme by the lawful possessor of a copy of such computer programme, from such copy. (i) in order to utilize the computer programme for the purpose for which it was supplied; or (ii) to make back-up copies purely as a temporary protection against loss, destruction or damage in order only to utilize the computer programme for the purpose for which it was supplied." 24. It is clear from the above said provisions of the Copyright Act t....
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....ght to make a copy of the software and use it for internal business by making copy of the same and storing the same in the hard disk of the designated computer and taking back up copy would itself amount to copyright work under Section 14(1) of the Act and license is granted to use the software by making copies, which work, but for the license granted would have constituted infringement of copyright and licensee is in possession of the legal copy of the software under the license. Therefore, the contention of the learned senior counsel appearing for the respondents that there is no transfer of any part of copyright or copyright and transaction only involves sale of copy of the copyright software cannot be accepted. It is also to be noted that what is supplied is the copy of the software of which the respondent-supplier continues to be the owner of the copyright and what is granted under the license is only right to copy the software as per the terms of the agreement, which, but for the license would amount to infringement of copyright and in view of the license granted, the same would not amount to infringement under Section 52 of the Copyright Act as referred to above. Therefore, ....
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....ion 2 to Section 9(1)(vi) of the Act. In any view of the matter, in view of the provisions of Section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents 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 payment made by the respondents to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 of the Act and consequences would follow as held by the Hon'ble Supreme Court while remanding these appeals to this Court. Accordingly, we answer the substantial question of law in favour of the revenue and against the assessee by holding that on facts and circumstances of the case, the ITAT was not justified in holding that the amount(s) paid by the respondent(s) to the foreign software Suppliers was not 'royalty' and that the same did not give rise to any 'income' taxable in India and wherefore, the respondent(s) were not liable to deduct any tax at source and pass....
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..../s 234A is mandatory and the assessee failed to point out any mistake in the computation of interest u/s 234A of the Act. Hence, the CIT(A) dismissed this ground of appeal of the assessee also. The assessee has not made its case before us also and as such we do not find any infirmity in the order of the first appellate authority and as such we dismiss this ground of appeal of the assessee 6. Let us now turn to the revenue's appeal (ITA No.804/Bang/2011). The effective grounds of appeal are as under: "2. The ld.CIT(A) failed to appreciate the decision in the case of Ansaldo Energia SPA vs. ADIT 115 TTJ (Chennai) 942 and the decision of the Hon'ble SC in the case of CIT vs. Anjum M.H.Ghuswalla l& other (252 ITR 1) wherein it was held that the levy of interest u/s 234A, 234B & 234C is mandatory in nature. 3. The ld.CIT(A) erred in directing the AO to delete the interest u/s 234B which defeats the intent and purpose of the provisions contained in section 209(1)(d) of the IT Act, and will nullify the powers of the revenue and is detrimental to the interest of revenue." 6.1. In effect, the revenue is aggrieved against the direction of the CIT(A) to the AO to delete the int....