2023 (12) TMI 463

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....arose for consideration before the Tribunal are reflected in the questions of law put forward in the instant appeal. For convenience, the proposed questions of law are set forth hereafter: (First issue) (i) Whether on the facts and circumstances of the case, the Ld. ITAT erred in holding that consideration received for granting rights to the customers under EULA to use the software is not table as Royalty both under Section 9(1)(vi) of the Act and under Article 12 of India-USA DTAA? (Second issue) (ii) Whether on the facts and circumstances of the case, the Ld. ITAT erred in holding that amount received towards annual maintenance charges of the software are not ancillary or subsidiary to enjoyment of right to use ....

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.... non-transferable and that the users were not given access to the source code. 6. As regards the amount which the AO treated as FTS is concerned, the Tribunal concluded that Fee for Included Services (FIS) under the said Article would only mean payment made in consideration for rendering technical or consultancy services, if such services were ancillary and subsidiary to the enjoyment of right in the property. 7. It was the Tribunal's view that since it had concluded that no right in the property had been transferred, Article 12(4)(a) of the DTAA had no applicability. 8. It may also be noticed that the Tribunal had also examined the applicability of Article 12(4)(b) of the DTAA. 8.1 Having examined the same, the Tribunal conclud....

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.... DTAA as well as under section 9(1)(vii) of the Act. However, while deciding the issue of taxability of receipts from granting of licence, we have held that they are not in the nature of royalty under the treaty provisions. That being the case, the receipt from annual maintenance charges being not ancillary or subsidiary to any royalty income cannot be brought to tax under Article 12(4)(a) of the tax treaty. Therefore, it has to be seen, whether it can come Within the purview of Article 12(4)(b) of the tax treaty. As could be seen, to be considered as FIS under Article 12(4)(b) under the tax treaty, the make available condition has to be satisfied. In the facts of the present appeal, the Departmental Authorities have failed to demonstrate t....