TaxTMI 
TaxTMI 
2021 (2) TMI 537
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....eived for sale of software products as Royalty and taxable in the hands of assessee in India. 5. The brief facts of the case are that the assessee is a company incorporated under the law of USA and is a non-resident from the Indian Income Tax perspectives. During the year under consideration, the assessee earned income from sale of software licenses to third party customers in India. The assessee filed return of income on 27-06-2019 declaring a total income at Nil in response to the notice u/s. 148 of the Act. We note that the assessee being a resident of USA adopted the beneficial provisions of India-USA tax treaty. In 148 proceedings, the AO requested the assessee to furnish details of software products sold by the assessee to Indian customers and asked to submit why the receipts from sale of software licenses in India should not be taxable as Royalty. It was explained that the assessee has received amounts to an extent of Rs. 19,69,76,597/- from sale of software licenses to its end user customers in India either directly or indirectly through authorized distributors, reseller or service provider. Further, it was stated no customization of assessee's software has been done....
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....-ordinate Bench in assessee's own case for A.Y. 2013-14 which held the sale of computer software is sale of copyrighted article and not transfer of copyright in the software and held the same as business income and not Royalty in respect of sale of software licenses to end users. 10. We note that the Ld. DR therein highlighted the assessee's acceptance of sale of software licenses to distributors and the resellers. The Tribunal considered the same and rejected the contention of Revenue that the resellers have been given a license by the assessee for consideration to commercially exploit such license at their end. The relevant portion has been discussed in paras 11 to 13. 11. This Tribunal in A.Y. 2014-15 also discussed the transactions between the assessee and its distributors, which has also been claimed by the Ld. DR to be in the nature of Royalty. On an examination of distributors agreement held the distributors, except for passing over the assessee products as acquired by them from the assessee, do not acquire any right or title in the intellectual property used in the software which always remains with the assessee and at no stage the right to use the copyright i....
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.... simply used by the licensee for his internal use and not for exploiting it commercially for earning income directly, the consideration paid by him ceases to be a royalty income in the hands of the licensor. Simply allowing one-to-one user of the intellectual property or a product using intellectual property is not the same thing as the other person commercially exploiting such a right in his business for selling the work as it is or selling products or services using the intellectual property. It is only when the licensee gets a right to copy the intellectual property either on the goods/services sold by him to customers or to sub-license the same to third persons for commercial exploitation, that the consideration amounts to royalty in the hands of the licensor. 13. Reverting to the factual panorama, it is seen that Resellers have not been conferred with any right to copy the software for further sale by them. They just purchase the Symantec Products as such for resale to the end customers in India. Each item of Symantec product is to be separately purchased by them for resale. The position would have been otherwise, if the assessee, instead of selling Symantec Products ....
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....ademarks, Trade Names and Copyrights'. Para 8(a) states that: 'During the term of this Agreement, Distributor is authorized by Symantec to use the trademark "Symantec", the Symantec logos for Symantec Products and the designation "Authorized Symantec Distributor" in connection with Distributor's advertisement, promotion and distribution of Symantec Products. Distributor's use of such trademark, logos and designation will be in accordance with Symantec's policies in effect from time to time.' Para 8(b) states that: 'Distributor agrees not to alter, erase, deface or overprint any notice on anything provided by Symantec'. Clause (c) of para 8 has caption - 'No Distributor Rights in Trademarks or Copyrights'. Clause (e) or para 8 states that: 'Distributor will not alter, reverse engineer, decompile, disassemble, rent, electronically distribute or market by interactive cable, remote processing services Symantec Products.' 15. On going through the above clauses of the Distributor Agreement, it becomes immensely clear that the Distributors have been appointed by the assessee in India to serve a link with Resellers. The Distributors ....