TaxTMI 
TaxTMI 
2022 (3) TMI 447
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....#39;] pertaining to Assessment Years 2007-08 to 2010-11. 2. Since common issues are involved in all these four appeals, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. For the sake of our convenience, we are considering the facts of Assessment Year 2007-08 in ITA No. 6194/DEL/2018. The grounds raised by the assessee read as under: "1. That on the facts and in circumstances of the case and in law, the Deputy Commissioner of Income Tax, Circle - 2(2)(I), International Taxation, Delhi ('Ld. AO') has erred in computing the total income of the Appellant at INR 799,99,60,616 as against 'NIL' income reported in the return of income by the Appellant. 2. Taxability of revenue fr....
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.... Ld. DRP and Ld. AO not just travelled much beyond directions of this Hon'ble Tribunal but without prejudice further erred in observing that amount paid by Microsoft Operations Pte Ltd. ('MO') to Appellant was for earning income from a source in India. 2.6 Without prejudice to abovementioned grounds of appeal as also contention that payments received by Appellant from MO are not taxable under Income Tax Act, 1961, Ld. DRP and Ld. AO have erred, in determining income of the Appellant for subject Assessment Year at INR 799,99,60,616 being amount received by Microsoft Regional Sales Corporation outside India for sale to distributors from India and thereby, completely ignored the fact that payments received by the Appellant from licensing of....
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....ndia. The claim of the assessee was based on the fact that the payments received by MOL from MO for grant of licence for use of software and further grant of rights by MO to MRSC for distribution of Microsoft Retail Software Products are not taxable as 'Royalty' under the provisions of the Act and also under India - US DTAA for the reason that the end user purchasing a MS Retail Software Product has only purchased a copyrighted article and has not acquired any copyright in such software. 6. Strong reliance was placed on various judgments. It was strongly contended before the Assessing Officer that it is only when a right to commercially exploit the copyright in the software has been granted that the consideration in respect of the same co....
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....ayment for information concerning industrial, commercial and scientific experience as the software includes such information. The payment for the software is the payment for trademark as the trademark is involved in such software. 10. Referring to various judicial decisions and trying to distinguish the facts of the case in hand, with the facts of the case of Infrasoft Ltd [supra], the Assessing Officer came to the conclusion that the entire sum received by the assessee is taxable as 'Royalty' in the hands of the assessee. 11. Objections were raised before the DRP but were of no avail. 12. Before us, the ld. counsel for the assessee drew our attention to the decision of the Tribunal in ITA No 5233/DEL/2010 & ITA Nos 945 to 947/DEL/201....
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.... in this case to arrive at the conclusion that the sales/licensing of the software was royalty in juxtaposition to Paragraph No. 11 of order of the Hon'ble jurisdictional High Court which are strikingly similar. Hon'ble Court after dealing with this issue extensively held that what is transferred in this matter is neither the copyright nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in the copyright, and the right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be business income ....
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....34B, Ld. AR placed reliance on the decision of the Hon'ble Delhi High Court in the case of DIT Vs GE Packaged Power Inc. (2015) 373 ITR 0065 (Delhi). In this case, the Hon'ble High Court of Delhi referred and followed its decision in the case of Director of Income Tax vs. Jacabs Civil Incorporated (2011) 330 ITR 0578 wherein it was held that Sec. 195 put an obligation on the payer i.e., any person responsible for paying any amount to a non-resident, to deduct tax at source at the rates in force from such payments, thus, entire tax is to be deducted at source which is payable on such payments made by the payer to the non-resident; that if the said payer has defaulted in deducting tax at source, the Department can take action against ....