2016 (1) TMI 177

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....nt of Rs. 1,11,08,623 is shown to have been paid under the Head "License Fee for purchase of Microsoft License Agreement". (2) The A.O. observed that the licenses are for use of Microsoft windows and other programmes. According to the A.O, these programmes are made according to the requirement of the assessee and therefore, the amount paid by the assessee is 'Royalty' and the TDS ought to have been made under section 194J(1)(c) of the I.T. Act. (ii) SODEXO COUPONS : 2.1. It was noticed that the assessee had given every employee free lunch coupons of Rs. 700 irrespective of their cadre and such expenditure has been borne by the company and is not included in the salary of the employees. He held that the Sodexo Coupons are in the nature of a pre-determination contract undertaken by Sodexo to honor the contract which is a fiduciary obligation and therefore, the provisions of section 194C of the Act are attracted. (iii) BANDWIDTH CHARGES :- The assessee has shown an amount of Rs. 25,98,629 as paid towards band width charges claiming it to be the payments towards internet connections. The A.O. held that such services enjoyed by the assessee are in the nature of technical services....

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....td. Vs. ITO 318 ITR (AT) 0197 Mum wherein it has been held that payment made for using bandwidth and network operation are not technical services and tax needed not be deducted from such payments u/s.194J. The learned Counsel for the assessee submitted that it is now settled that mere provision of facility to Use equipment, whatever may be the sophistication that went into the creation of such facility, is not technical service. Following decision of the Coordinate Bench in Pacific Internet (India) P ltd. Vs. ITO 318 ITR (AT) 0197 Mum. We uphold the order of the CIT(A) that payments of bandwidth are not liable for TDS under section 194J and dismiss the departmental appeal on this issue." Facts and circumstances of the case for the years under consideration being similar to those considered by the Tribunal in the above decision for the assessment years 2004-05 to 2006-07, respectfully following the said decision, we uphold the impugned order of the CIT(A) on this issue, and dismiss ground No.4 of the Revenue in these appeals." 6.1. Facts and circumstances in the case before us being the same, respectfully following the order of the Coordinate Bench, we hold that the band width ....

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....ause one has the copyrighted article, it does not follow that one has also the copyright in it. It does not amount to transfer of all or any right including licence in respect of copyright. Copyright or even right to use copyright is distinguishable from sale consideration paid for "copyrighted" article. This sale consideration is for purchase of goods and is not royalty. 40. The license granted by the Assessee is limited to those necessary to enable the licensee to operate the program. The rights transferred are specif ic to the nature of computer programs. Copying the program onto the computer's hard drive or random access memory or making an archival copy is an essential step in utilizing the program. Therefore, rights in relation to these acts of copying, where they do no more than enable the effective operation of the program by the user, should be disregarded in analyzing the character of the transaction for tax purposes. Payments in these types of transactions would be dealt with as business income in accordance with Article 7. 41. There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted article....

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....der the Income Tax Act or under the DTAA. 44. The licensees are not allowed to exploit the computer sof tware commercially, they have acquired under licence agreement, only the copy righted sof tware which by itself is an article and they have not acquired any copyright in the sof tware. In the case of the Assessee company, the licensee to whom the Assessee company has sold/licensed the sof tware were allowed to make only one copy of the sof tware and associated support information for backup purposes with a condition that such copyright shall include Intra Asia Trading (P) Ltd. copyright and all copies of the sof tware shall be exclusive properties of Intra Asia Trading (P) Ltd. Licensee was allowed to use the sof tware only for its own business as specif ically identif ied and was not permitted to loan/rent/ sale/sub-licence or transfer the copy of sof tware to any third party without the consent of Intra Asia Trading (P) Ltd. 45. The licensee has been prohibited from copying, de-compiling, de-assembling, or reverse engineering the sof tware without the written consent of Intra Asia Trading (P) Ltd. The licence agreement between the Assessee company and its customers stipul....