TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 338
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....late Authority "FAA") in appeal No. 1030/2017-18 and 10307/2018-19 respectively arising out of an appeals before it against the order dated 24.01.2018 and 22.02.2019 for respective years passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as "the Act‟) by the ld AO, Addl. CIT, Circle-3(1)(2), New Delhi (hereinafter referred as the Ld. AO). 2. The Assessee Company is incorporated under the laws prevalent in Singapore and is engaged in the business of developing software and providing allied services. A return of income was filed declaring total income as Nil and the case was selected for complete scrutiny. During the year under consideration the Assessee company has licensed software to Reliance Jio Infocomm Ltd ( here....
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.... 22.03.2021, wherein, the question with regard to no tax is deductible on the payment/ credit made by M/s. Reliance Jio Infocom Ltd to present Assessee as SDL for software was considered and again relying on the judgment of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Pvt Ltd Vs. CIT (supra) case it was held that the Assessee in that case i.e. Reliance Jio Infocom Ltd does not have any tax withholding obligation u/s 195 from payment made on account of software. 6. The ld DR defended the findings of the ld Tax Authorities below. She submitted that since there is provision of parting away with source code, the principles laid in the judgment of the Hon‟ble Karnataka High Court, in the case of Samsung Elect....
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...."9. Except as otherwise agreed in the License Grant the Buyer may not: (a) assign, lease, transfer or sublicense the Software licences or Documentation to any third party for use in that third party's business operations except in cases where such business operations are related to providing services to Buyer, nor use the licensed Software to support any third party processing ; (b) cause or permit decompilation, disassembly or reverse engineering of the Software, in whole or in part, except to the extent as permitted by mandatory provisions of the applicable law; (c) disclose or make available to, or permit use of the Software by persons other than Buyer's employees, consultants or implementors of the Software; (d) write or dev....
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.... that clause 9(a) as reproduced above seems to have been selectively quoted and applied by the ld CIT(A). The Assessee has not agreed for absolute transfer or assignment, sub-license or lease of the rights to the Reliance Jio as 3rd Party but rather the right has been restricted by the Clause 9(a) as it is an exception clause. Further, it is only in regard to the business operation related to providing services to Reliance Jio assignment, lease, transfer or sub-license to a 3rd party is permitted. That only indicates that when the 3rd party is providing any service by its business operations to Reliance Jio only, in those circumstances the said 3rd party may be allowed to use the software license or documents by the buyer, reliance Jio. Suc....
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....of the rights in favour of the buyer to use the license software to support any 3rd party processing. 12. In regard to fourth reason, the ld CIT(A) has failed to appreciate that in the case in hand, when the agreement specifically mentions that the Assessee has given to his buyer non-exclusive and non transferable but enterprise wide unlimited use rights in the software, then reproduction for multiple end users, within the association of buyers cannot be construe to be conferring proprietary interest on the licensee, by parting with any copyright in the software. It is merely for the convenience and to avoid multiple transactions and consequent agreement for every end user of the Reliance Jio. 13. Coming to the last reason number five, it....