TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1603
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....rvices. Further, it provides data/insights and information to help consumers and businesses make informed decisions. In the assessment years under dispute, the assessee had following receipts: Sr. No. Nature of Software Receipts during the year (in INR) A.Y. 2020-21 AY 2021-22 AY 2022-23 1 iCRS platform 12,29,22,049 11,27,92,214 14,40,09,951 2 Adviser platform 2,08,15,772 1,84,83,575 2,55,24,264 3 Decision center 12,41,91,624 6,22,60,284 - Total 26,79,29,445 19,35,36,073 16,95,34,215 4. In the return of income filed for A.Y. 2020-21, the assessee not being clear on the legal position on taxability of these receipts initially offered them as income in the return of income. However, in course of assessment proceeding, based on the ratio laid down by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs. CIT & Anr. [2021] 432 ITR 471 (SC), the assessee made a revised claim that the receipts are not taxable as royalty in India in terms with India-USA DTAA. However, insofar as A.Ys. 2020-21 and 2022-23 are concerned, the assessee....
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....DTAA, which is not at all applicable. This shows non-application of mind by the A.O. 9. Be that as it may, while deciding the issue, in the lead assessment year, i.e., A.Y. 2020-21, learned First Appellate Authority has held the receipts to be not in the nature of royalty under Article 12(3) of India-USA DTAA on the following reasoning: 6. Findings and Decision: 6.1 On a careful reading of the above submissions of the Appellant, the broad arguments of the Appellant can be categorized as follows: • The receipts earned by the Appellant from the software licenses are not chargeable to tax as 'royalty' as per the provisions of the India-USA DTAA • The nature of software licenses and rights granted by the Appellant as squarely covered factually by the Hon'ble Supreme Court's decision in its decision of Engineering Analysis (supra) • The AO has mis-interpreted the clauses of the license agreement and has arrived at erroneous conclusions • Each and every contention raised by the AO is bad in law and facts - as specifically rebutted by the Appellant I have gone through the detailed submissions....
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.... India, the licensed materials during the term of this agreement Clause 2.1 of the agreement Rights and ownership expressly stipulated that no copyright in the computer program TU CIBIL shall not acquire any right, title, interest, copyright, trade secret, patent, or other proprietary rights through this license Clause 2.3 of the agreement TU CIBIL shall not acquire any right, title, interest, copyright, trade secret, patent, or other proprietary rights in or to the licensed materials Clause 2.3 of the agreement TU CIBIL shall not acquire any right, title, interest, copyright, trade secret, patent, or other proprietary rights in or to the licensed materials Clause 2.3 of the agreement Nature extent rights granted Indian Co There 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 TU CIBIL promises and agrees not to copy, distribute, transfer (by any means), display, sublicense, rent, reverse-engineer, decompile, or disassemble the Software or any part thereof, without the prior written consent of the Company Clause 2....
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.... a reading of all the license agreements submitted by the Appellant the following commonalities arise (extracts of one agreement [Adviser] captured for brevity): • The licensee shall not acquire any right, title, interest, copyright, trade secret, patent, or other proprietary rights through this license 2.3. Except solely as explicitly set forth in this Agreement or to the extent otherwise required for a party's performance under this Agreement, nothing in this Agreement shall be construed, by implication or otherwise, to grant any other right or license to a party under any patent, Invention, copyright, or any other intellectual property right, now or hereafter owned, controlled by, or licensed to, the other party. Except solely as explicitly set forth in this Agreement, TransUnion CIBIL has not, and shall not, through this Agreement or otherwise, acquire any right, title, interest, copyright, trade secret, patent, or other proprietary rights in or to the Licensed Materials. Moreover, except for the express limited rights of usage granted to TransUnion CIBIL above, the entire right, title and interest in and to the Licensed Materials shall remain vested i....
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....fails in this regard. Merely because the modification as a word is included on a conservative basis to cover all types of situations and eventualities, it cannot be said that explicitly the licensee possesses the right to modify the software. This is affirmed by the Apex Court as well in its decision (in Paragraph No. 38 and 117). 6.15 Similarly the jurisdictional Mumbai Tribunal in the case of Tata Consultancy Services Ltd. vs DCIT [2023] 154 taxmann.com 372 (Mumbai Trib.) has held that the same shall not amount to copyright infringement and therefore not be liable to tax as royalty. Basis the above discussions, reading of the agreements and on perusal of the relevant paragraphs in the Apex Court's decision, I am of the view that the right to modify the software is not granted to the licensee and since the licensee is specifically restricted from making copies/ reproduce the license etc, it cannot be said that an infringement under the provisions of section 52(aa) of the Copyright Act occurs. Therefore, I do not concur with the conclusion reached by the AO on account of modification rights in the license agreements 6.16 I h....
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....6.8 of the assessment order) I agree to the submissions made by the Appellant (as per Point No. 107 to 129 of the written submission of the Appellant) and disagree to the AO's contentions The judgment of the Apex Court by agree to the submissions made by placing reliance on Singapore DTAA will not apply to USA DTAA and certain observations of the Court is not factually correct and the Revenue has preferred a Review Petition before the Apex Court (Page No. 13, Para No.7.2 of the assessment order) I agree to the submissions made by the Appellant (as per Point No. 130 to 133 of the written submission of the Appellant) and disagree to the AO's contentions Basis the above, given that the Apex Court's decision in Engineering Analysis (supra) applies to the Appellant's case, and further given that the Appellant is a tax resident of USA and therefore eligible to invoke the favorable provisions of the India-USA DTAA, I hold the following: • • The receipts earned by the Appellant from the software licenses are not chargeable to tax as 'royalty' as per the provisions of the India-USA DTAA • The nature of software....