TaxTMI 
TaxTMI 
2017 (9) TMI 244
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....3(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) was issued on 24.9.2012. Again notice u/s. 143(2) of the Act alongwith questionnaire under section 142(1) was issued on 12.8.20132 and 30.10.2014. Due to change of incumbency AO issued notice u/s. 142(1) on 20.11.2014. In response to the notices, the assessee's AR attended the proceedings from time to time and filed the details. The assessee company is engaged in the business of providing business of process management services to credit card companies, in particular SBI Cards and Payment Services Private Limited in respect of payment products such as credit cards, for which purpose it had entered into an agreement dated 6.6.2002 with that company. During the course of assessment proceedings, the AO observed that the assessee has signed an agreement called as End-User License Agreement on 7.7.2000 with US based company M/s GE Capital Corporation, which follows the assessee to use the 'Vision Plus' software program, which is used by various banks for enabling them to process credit card transactions. GECC is the global license holder of the said Vision Plus software program. During the assessment proceedings u/s. 143....
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.... the appeals for these years, on careful examination of the EULA between the Appellant and GECC, I had observed that GECC holds a global license for the software which is widely used and is available 'off the shelf' pursuant to its agreement with Pay Sys. This software enables carrying out of accounting and processing -of credit card transactions. Vision plus is an 'Application Software' which manages aspects of credit cards right from the time of the application for credit card is made, evaluated, account is created, transactions are authorized, raising disputes, sending statements, customer services and online payments processing. The software is mainly for credit card transactions processing by multinational banks and transaction processing companies. Various banks and financial institutions use this application software to store and process credit card, debit card, prepaid closed end loan accounts and process financial transactions which is available off the shelf. I also find that GECC itself has received the right to use the software internationally including its group entities for its business. It does not have any right to commercially exploit the software. ....
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....ocable transfer of bundle of rights on it. On the other hand, the Appellant is bound by various conditions in respect of the manner of use of the license. Keeping in view the same, the Appellant Company's case gets squarely covered by the Hon'ble SC in the case of MIs Empire Jute Co. Ltd. (supra) and other cases cited by the Appellant in its defence, since no enduring benefit has been acquired by the Appellant through the payment of license fee for the limited use of the license. The reliance of the AO on various judicial pronouncements has been distinguished by the- Appellant on facts. 3.3 As the facts for AY 2011-12 are similar to the facts of AY 2008-09 and AY 2010-11, I thereby hold that my findings in the order passed for AY 2008-09 would stand equally applicable here. 3.4 In view on the same, hold that the impugned payment of Rs. 3,70,98,989/- on account of license fee and data management service charges for use of the 'Vision Plus' software Was revenue in nature and allowable u/s 37 of the Act. Accordingly, this ground is allowed in favour of the Appellant. The alternative plea of the Appellant thus, become infructuous." 6.1. We further f....
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....ment. In terms of clause 2.3, the assessee does possess no right either to sell it or alienate in any other manner. The relevant clauses No. 2.2 and 2.3 of the license agreement are reproduced as under : "2.2. GECC shall provide the Licensed Program, any revisions to the Licensed Program and any updates to the Licensed Program to GECBPMS for its business use only in accordance with this agreement." 2.3. GECBPMS undertakes that it shall not; (a) make the licensed program or any part thereof available to any period other than its employees on a "need to know" basis; (b). copy the Licensed Program or any part thereof, other than for archival backup purposes; (c). use the Licensed Program for any purpose other than as permitted by clause 2.2 of license, sell or otherwise alienate the Licensed Program in any manner whatsoever; or (d). Duplicate, market, license or develop software programs that compete with the Licensed Program and/or exploit commercially the Licensed Program in any manner whatsoever." Similarly, clause 5 and its sub-clauses give the right of termination of license agreement to either parties under various c....
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....to rebut the contention of the assessee that the impugned software is an application software and is being used for accounting purposes. Such software are used by various banks and financial institutions. Moreover, the ld. CIT(A) in succeeding assessment years 2008-09, 2010-11 and 2011-12 has categorically gave finding of fact that the software is a application software which is routine in nature and used for accounting purposes. Therefore, in view of decisions in the case of CIT vs. Asahi India Safety Glass Ltd (supra) and CIT vs. Amway India Enterprises (supra), we are of the considered opinion that the right to use the vision plus software program does not have any effect of providing enduring benefit and the payment made to GECC(USA) is only the license fees and not the price for acquisition of capital asset. The assessee did not acquire any ownership on the software and after termination of license agreement, all the rights and title remained with GECC (USA). The ld. DR failed to dislodge the findings of the ld. CIT(A) given in the orders passed for subsequent years after considering the same license agreement and various decisions of Hon'ble High courts and Supreme Court. It ....