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2023 (3) TMI 478
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....15, assessee preferred this appeal. 2. Briefly stated relevant facts are that the assessee Company is engaged in the business of providing Information Technology Enabled Services (ITES) to its parent company S&P Global Market Intelligence LLC, USA (earlier known as Capital IQ Inc., USA). During the year under consideration, the assessee had made certain remittances aggregating to Rs. 14,95,53,994/- to S&P Global Inc. (formerly known as McGraw Hill Financial Inc.) towards reimbursement for software licenses. On completion of proceedings, the learned Assessing Officer passed an order under section 201(1)/(1A) of the Act on June 15, 2018, treating the said remittances liable to tax deduction as 'Royalty payments' and thereby raising a deman....
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....ing the assessee to use the same, and, therefore, absolutely there is no need to look into the agreement between the assessee and the parent company. He further submitted that the invoices submitted by the assessee clearly establish that it is only a matter of reimbursement and the assessee is bound by the terms of license granted by the Microsoft and Dell, irrespective of the nature of task performed on these softwares. He, therefore, submits that the decision of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited (supra) is applicable to the facts of the case. 5. Per contra, learned DR heavily relied upon the decision of the authorities below and submitted that unless the facts are verified, ....
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....ndering their services to the parent company itself and by nature it is shrink wrap computer software. In these circumstances, when the learned Assessing Officer herself recorded that the parent entity has no role to play in the transaction of assessee's access to the software, the agreement between the parent entity and Microsoft and Dell does not appear to be much relevant. Suffice to say that through the invoices produced by the assessee and as found by the learned Assessing Officer, there is no component of income involved in this license transaction accruing to the parent entity. 8. In the case of Engineering Analysis Centre of Excellence Private Limited (supra), the Hon'ble Supreme Court held that,- "54. There is no doubt ....
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....of refund when regular assessment takes place, as the non-resident assessee alone would be entitled to such refund, is also pointed out in paragraph 18 of the judgment in GE Technology (supra). It was after keeping all this in view that this Court then set aside the judgment of the High Court of Karnataka dated 24.09.2009 and remanded the case to the High Court for a decision of the question "on merits", i.e., on the sole question as to whether the ITAT was justified in holding that the amounts paid by the appellants to the foreign software suppliers did not amount to royalty, as a result of which, no liability to deduct TDS arose............................................. ............................................................. ....
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....d under section 30 of the Copyright Act, which is a licence which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. 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 consequently, no infringement takes place, as is recognized by section 52(1)(aa) of the Copyright Act. It makes no difference whether the end-user is enabled to use computer software that is customised to its specifications or otherwise. v) A non-exclusive, non-transferable licence, merely enabling the use of a copyrighted product, is in the nature of....
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....cts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is 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 in the computer software, and that....