AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1340
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a foreign company incorporated in USA. It is engaged in the business of development of mathematical computing software for engineers and scientists. The assessee sells software licences to its distributor in India i.e., "MathWorks India Pvt. Ltd.," who in turn sells the software licences to end-users. For the Assessment Year 2017-18, return of income was filed on 30.03.2018 declaring income of Rs. 89,58,63,752/-. Subsequently, assessee filed revised return on 20.06.2018 declaring Nil income and claimed refund of the entire amount deducted at source amounting to Rs. 9,68,87,664/-. 3. The assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 22.09.2019. During the course of assessment proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT (A) held that it is only a sale of copyrighted article and not rights in the nature of copyright under the agreement entered by the assessee with its distributor viz., ManWorks India Pvt. Ltd. As regards the receipt of Rs. 30,11,18,601/- towards maintenance services, the CIT (A) held that since same is inextricably linked to the supply of software and since the receipts on account of sale of software licence itself is not taxable as "royalty", the provisions of Article 12(4)(a) of India-US DTAA would not apply. Accordingly, the entire addition made by the AO was deleted by the CIT(A). 5. Aggrieved by the Order of the CIT(A), Revenue has filed the present appeal before the Tribunal. The learned DR strongly relied on the grounds rai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is no further right to sub-license or transfer. nor is there any right to reverse-engineer. modify. reproduce in any manner otherwise than permitted by the license to the end-user. What is paid by way of consideration, therefore. by the distributor in India to the foreign. non-resident manufacturer or supplier, is the price of the computer programme as goods. either in a medium which stores the software or in a medium by which software is embedded in hardware, which may be then further resold by the distributor to the enduser in India. the distributor making a profit on such resale. Importantly. the distributor does not get the right to use the product at all. 46. When it comes to an end-user who is directly sold the computer programme.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dian distributor only makes a profit on the sale of each book. Importantly there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of the same. On the other hand, if an English publisher were to sell the same book to an Indian publisher. this time with the right to reproduce and make copies of the aforesaid book with the permission of the author. it can be said that copyright in the book has been transferred by way of license or otherwise. and what the Indian publisher will pay for, is the right to reproduce the book. which can then be characterised as royalty for the exclusive right to reproduce the book in the territory mentioned by the license." 7. In light of categoric finding by the CIT (A) th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and services available may vary by License Offering." The AO had held that these services. being ancillary and subsidiary to the sale of software, the payment for which had been characterized as royalty by the AO would be taxable under the provisions of Article 12(4)(a) of the Treaty. reproduced below: 4. For purposes of this Article. fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right. property or information for which a payment described in paragraph 3 is received : or....