TaxTMI 
TaxTMI 
2022 (4) TMI 166
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.... related to the computer services and information technology. The Assessee has provided sale of off the shelf software and provision for connectivity/lease line internet with security feature etc. during the year under consideration from outside India. 3.1 The Assessee had filed its return of income electronically on dated 30.09.2009 by disclosing an income of Rs. 617,543,077/-. The case of the Assessee was selected for scrutiny and the AO issued the notice dated 03.08.2011 u/s 143(2) of the Act, which was replied by the Assessee by filing information and documents in the assessment proceedings and therefore, on the basis of information and documents furnished, the AO passed the order u/s 144C/143(3) of the Act on dated 02.05.2013 by making additions of Rs. 1,14,09,24,658/- on account of income from sale of off the shelf software and of Rs. 15,01,19,737/- on account of income from connectivity/lease line. 4. Aggrieved by the said additions made by the AO, the Assessee preferred first appeal before the Ld. Commissioner who vide impugned order deleted the said additions. 5. The Revenue department being aggrieved by impugned order, preferred the instant appeal and raised the ....
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....eering Analysis Center of Excellence Pvt Ltd 432 ITR 471 made the analysis of various judgments passed by Hon'ble Apex Court and High Courts as well and observed that the right to reproduce and right to use computer software are distinct and separate rights, as has been recognized in State Bank of India Vs. Collector of Customs (2001) 1 SCC 727, the former amounting to parting with copyright and latter in the context of non-exclusive EULAs, not being so. 7.3 As in the instant case, the customers of the Assessee have been given right to reproduce the software and therefore, payment to the Assessee would constitute the 'royalty'. The customers of the Assessee are not only getting the right to make photo copies but also getting authority to make multiple copies and to make payment on copy basis and therefore, the judgment of the Hon'ble Apex Court supports the case of the revenue. 7.4 It was further contended by the ld.DR that the Assessee is not a reseller of computer software but it has given the customer a right to make copies and therefore the Assessee acted as 'principal' or as an 'agent' of the software manufacturer. Therefore, payment made by the customers from India to t....
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....s and perused the material available on record. We have considered the rival claim of the parties. The claim of the revenue more or less is that transaction of sale of computer software to its customers implicit involved making of multiple copies of the software clearly indicates 'transfer of copyright' and therefore the consideration received qua said transactions amounts to "royalty" as per the Act and DTAA. 9.1 The Assessee on the contrary claimed that the Assessee purchasing the software from 'Microsoft company' and as per terms of the agreement with 'Microsoft' having no right to reproduce or to make any change in 'off the shelf software' and therefore, the question of passing a right by the Assessee to its customers does not arise. 9.2 We observe, recently the Hon'ble Apex Court in para no 173 of its judgment in the case of Engineering Analysis Centre of Excellence Pvt. Ltd (supra), clearly held that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright i....
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....or end-users. iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users. Xxxx xxxx xxxx 97. The AAR then reasoned that the fact that a licence had been granted would be sufficient to conclude that there was a transfer of copyright, and that there was no justification for the use of the doctrine of noscitur a sociis to confine the transfer by way of a licence to only include a licence which transferred rights in respect of copyright, by referring to explanation 2 to section 9(1)(vi) of the Income Tax Act. It then held: "Considerable arguments are raised on the so called distinction between a copyright and copyrighted articles. What is a copyrighted article? It is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licencee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic manifestation of a programme, but also the use of or the right to use the copyright ....
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....es not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. 174. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed." 5. Further, this Court on similar facts has allowed writ petitions filed by the similarly placed assessee in EY Global Services Limited vs. Assistant Commissioner of Income Tax &Anr, W.P.(C) 11957/2016 and EYGBS (India) Private Limited vs. Joint Commissioner of Income Tax & Ors., W.P.(C) 12003/2016. The relevant portion of the said judgment is reproduced herein below:- "...13. A reading of the above judgment would clearly show that for the payment received by EYGSL (UK) from EYGBS (India) to be taxed as 'royalty', it is essential to show a transfer of copyr....