TaxTMI 
TaxTMI 
2022 (7) TMI 675
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....hat the assessee is tax resident of France, who filed its return declaring total income at Rs.7.73 crore. During the course of assessment proceedings, the AO observed that a sum of Rs.12.88 crore was not included in its total income. This amount consisted of a sum of Rs.4.32 crore towards I.T. Support services and Rs.8.56 crore towards Software Maintenance services. He, therefore, included Rs.12.88 crore in the total income in the draft order. The assessee approached the Dispute Resolution Panel (DRP), which held that receipt of I.T. Support services amounting to Rs.4.32 crore as not chargeable to tax. However, Software Maintenance charges of Rs.8.56 crore were held to rightly added as Royalty both under the provisions of the Act as well as....
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.... Engineering Analysis Centre of Excellence Pvt. Ltd. (supra) has overturned the decision of Samsung Electronics (supra) by holding held that ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied. Where the core of a transaction is to authorize the end-user to have access to and make use of the "licensed" computer software product over which the licensee has no exclusive rights, no copyright is parted with and hence, the consideration for it cannot be treated as Royalty in the hands of the recipient. If we view the receipt of Rs.8.56 crore as consideration for licensing of software, as has been decided by the authorities below on macro level, then obv....
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....the penalty. He further bolstered his point of view by stating that the assessee accepted the addition without assailing it in further quantum appeal. 5. Albeit, the AO treated Rs.8.56 crore received by the assessee as a consideration for licensing of the software, he did realize during the course of the draft proceedings, that the assessee, in fact, granted license "only to authorize the licensee to have access to the copyrighted database rather than granting any right in or over the copyright as such". This discussion has been made on page 12 of the draft order. Similar is the position regarding the direction given by the DRP in which the assessee's contention has been recorded at page 4 submitting that "the assessee does not grant the I....
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....ekaert Industries Private Limited Vs. DCIT (ITA No.1003/PUN/2017 dated 13-12-2021. 7. Going with the ratio of the above Pune Tribunal orders, the amount in question received by the assessee as a consideration for allowing access to its Database abroad will not be governed by the decision in Engineering Analysis (SC) as this decision applies only to the cases of software transferred without giving any right to copy. Resultantly, it will be royalty chargeable to tax as has been held by the AO and accepted by the assessee. This judgment may apply to that part of the overall transaction of the assessee which is restricted to purchasing software for the purpose of installation in its Database Facility. As the assessee acquired the software only....
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....are, there cannot be a case of gaining access to the underlined technology of the equipment, when payment is made for using it. That is the raison d'etre for the legislature using the word `copyright' in clause (v) of the Explanation 2 and omitting it in the clause (iva). If the assessee's point of view of the consideration for the use of the IT facility becoming royalty only on getting access to the underlined technology is taken to logical conclusion, then the applicability of clause (iva) of the Explanation 2 will invariably be ousted making it a redundant piece of legislation as there cannot be a case of paying something for using an equipment by getting access to the underlined technology which led to its creation. In a loose sense, on....