TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 813
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....ysical copy of Form No. 36 along with grounds of appeal on 16.05.2024. Though, the appeal was filed in time there was delay in filing of appeal (Form No.36 and grounds of appeal) physically. He submitted that the delay in filing of physical copy of appeal was for the reason that there were change in the authorized signatory and thereafter there was change in tax consultants who were originally looking after tax matters of the assessee in India. Since, the assessee has no physical office in India, the assessee was constrained to coordinate/handle Income Tax matters remotely from the USA. 3.1. We have heard the submissions made by ld. Counsel for the assessee and have examined the application of condonation of delay. The impugned order was passed during Covid period on 06.04.2021. The Hon'ble Apex Court suo moto after taking cognizance of the hardship cause of the pandemic to the litigants extended the limitation for filing of any suite/appeal/application. [RE: Cognizance for extension of Limitation, In re:, 134 taxmann.com 307 (SC)]. The Hon'ble Supreme Court of India directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation as ma....
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....f India-USA DTAA. 5.2 The ld. Counsel for the assessee submits that the second addition is with respect to subscription fee of Rs. 21,33,459/- received during the year. He contended that the assessee does not have any Permanent Establishment (PE) in India in terms of Article 5 of India-US DTAA. The TDS was deducted on subscription fee, the assessee claimed refund of TDS deduction in the return of income as per Form No. 26AS, the same was denied by the Revenue. Narrating, facts he submitted that, the assessee had received subscription fee from two companies namely; Comviva Technologies Ltd. and Plintron Global Technology Solutions P. Ltd. in terms of the agreement entered into between the said entities in the year 2016. As per the GSMA Intelligence Master License Agreement between the assessee and Comviva Technologies Ltd. (at page 1 to 6 of the paper book), the assessee was to provide non transferable, non sub-licensable, non exclusive, limited license to access data of the assessee with respect to: * Global Subscriber, Sim and Connection; * MNO Financial and Operation Performance Data; * MNO Network Data; & * Qualitative Reports and Feed. ....
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....try for providing unique identification number known as IMEI or TAC for tracking mobile devices. As submitted before us by learned counsel for the assessee, this is the only company in the world which allocates these numbers. As discussed earlier, the assessee is a non-profit organisation, hence, exempt from taxation in USA. The specific activity of the assessee is to provide a unique identification number, which can be incorporated/implanted in the mobile devices by device manufacturers in a combination with other numbers to be provided by the device manufacturer to create a 14 digit IMEI number, which is unique to each mobile device. As discussed earlier, in so far as India is concerned, the assessee has appointed MSAI as the reporting body (RB) through agreement dated 22.07.2011. As per the terms of the agreement, the assessee shall provide a database to MSAI through which TAC can be generated and allocated to the device manufacturer. As a RB, MSAI is required to assist GSMA in allocation of TAC to mobile device manufacturers, approve the representatives of mobile device manufacturers, and the brand owners distributing or offering the mobile equipments for sale. So the only serv....
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....any information concerning technical, industrial commercial or scientific experience. What the assessee provides is a database containing unique numbers, which has to be provided to the mobile equipment manufacturers for implanting in the mobile devices so that the devices can be tracked and put in the black list in case of theft or misuse so as to prevent crime. 12. As per article 12(3) of India-USA DTAA, the amount received cannot fall within the ambit of royalty, as the consideration received cannot be construed to be for use or right to use any copyright of literary, artistic or scientific work including motion picture films and works on film or video tape for use in connection with television. Neither it can be a consideration for any patent, trade mark, design or model, plan, secret formula or process. It also cannot be for information concerning industrial, commercial or scientific experience. It also cannot be considered to be payment for use of or the right to use industrial, commercial or scientific equipment. Though, the Assessing Officer has observed that IMEI number is a unique invention to track the mobile equipment and information concerning industrial, comm....
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...."2. OWNERSHIP AND LICENSE 2.1 The Deliverables and all rights, including, without limitation, title and all intellectual property rights contained therein, are owned by GMA and/or its licensors and their Affiliates and are protected by international treaty provisions and all other applicable national laws of the country in which they are being used. 2.2 GMA and its Affiliates' trademarks, service marks, trade names, logos or other words or symbols are and will remain the exclusive property of GMA and its Affiliates, as applicable. Any use by the Client of the trademarks and/or logos of GMA or its Affiliates shall be subject to a separate written agreement between GMA and the Client. 2.3 Subject to the terms and conditions set forth herein, GMA grants to the Client, and the Client accepts, a non-transferable, non-sub-licensable, non-exclusive, limited license for the Term (as defined below) to access the Deliverables solely for the Purpose. There are no implied licences granted under this Agreement. 2.4 Except as explicitly permitted under Clause 2.3 and to the extent it is permitted under applicable law, the Client shall have no other right t....
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....fee would not be subject to tax in India as per Article 7 of the India-US DTAA. Whereas, stand of the Revenue in the said case was that Subscription Fee is in the of nature of technical consultancy and would fall within the ambit of Article 12(4) i.e. Fee for Included Services. The Department also tried to make out a case to treat Subscription Fee as royalty within the meaning of Article 12(3) of India-US DTAA. The Hon'ble Delhi High Court held that the Subscription Fee received by the assessee for granting access to its data does not constitute fee for technical services nor does the Subscription Fee is in the nature of royalty. The relevant observations of the Hon'ble Delhi High Court holding Subscription Fee is not in the nature of 'royalty' are as under:- "11. We find that similar would be the position which would obtain when subscription fee is examined on the anvil of article 12 of the DTAA. If the Department were to describe subscription fee as 'royalty' they would necessarily have to establish that the payments so received by the assessee was consideration for the use of or the right to use any copyright or a literary, artistic or scientific work as defined....
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....s either in entirety or partially co-extensive with the owner/transferor who divests himself of the rights he possesses pro tanto. 90. The licence granted to the licencee permitting him to download the computer programme and storing it in the computer for his own use is only incidental to the facility extended to the licencee to make use of the copyrighted product for his internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because it is only integral to the use of copyrighted product. Apart from such incidental facility, the licencee has no right to deal with the product just as the owner would be in a position to do. 91. There is no transfer of any right in respect of copyright by the Assessee and it is a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under the Income-tax Act or under the DTAA. 92. The licencees are not allowed to exploit the computer software commercially, they hav....
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.... Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471/(2022) 3 SCC 321 when it observed- "179. The Revenue, therefore, when referring to "royalties" under the DTAA, makes a distinction between such royalties, no doubt in the context of technical services, and remittances for supply of computer software, which is then treated as business profits, taxable under the relevant DTAA depending upon whether there is a PE through which the assessee operates in India. This is one more circumstance to show that the Revenue has itself appreciated the difference between the payment of royalty and the supply/use of computer software in the form of goods, which is then treated as business income of the assessee taxable in India if it has a PE in India. Conclusion 180. Given the definition of "royalties" contained in Article 12 of the DTAAs mentioned in para 46 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or ....
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....resident seller, resells the same to resident Indian distributors or end-users. (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users.. .. The Authority for Advance Rulings then reasoned that the fact that a licence had been granted would be sufficient to conclude that there was a transfer of copyright, and that there was no justification for the use of the doctrine of noscitur a sociis to confine the transfer by way of a licence to only include a licence which transferred rights in respect of copyright, by referring to Explanation 2 to section 9(1)(vi) of the Income-tax Act. It then held: 'Considerable arguments are raised on the so-called distinction between a copyright and copyrighted articles. What is a copyrighted article ? It is nothing but an article which incorporates the copyright of the owner, the assignee, the exclusive licensee or the licencee. So, when a copyrighted article is permitted or licensed to be used for a fee, the permission involves not only the physical or electronic m....
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....ent of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the Authority for Advance Rulings in Citrix Systems (AAR) (supra) is set aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed." 5. Further, this court on similar facts has allowed writ petitions filed by the similarly placed assessee in EY Global Services Ltd. v. Asst. CIT W. P. (C) No. 11957 of 2016 and EYGBS (India) Pvt. Ltd. v. Joint CIT W. P. (C) No. 12003 of 2016 [2022] 441 ITR 54 (Delhi). The relevant portion of the said judgment is reproduced hereinbelow (page 69 of 441 ITR) : "A reading of the above judgment would clearly show that for the payment received by EYGSL (UK)....
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....the Supreme Court. In view of the above, the impugned rulings dated August 10, 2016 passed by the learned Authority for Advance Rulings are set aside and it is held that the payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), does not amount to 'royalty' liable to be taxed in India under the provisions of the Income-tax Act, 1961 and the India-UK DTAA." 6. Since, the issue of law raised in the present appeals has been conclusively decided in favour of the assessee by the Supreme Court, no substantial question of law arises for consideration in the present appeals. It is also pertinent to mention that the appellant had admitted before the Income-tax Appellate Tribunal that the dispute in question had been decided in favour of the assessee by the Tribunal in the earlier years. Accordingly, the present appeals are dismissed." 15. Similarly, in order for that income to fall within the ambit of 'fees for included services', it was imperative for the Department to establish that the assessee was rendering technical or consultancy services and which i....
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....how that the recipient of the services is not enabled to provide the same service without recourse to the service provider, i.e, the assessee. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the Assessing Officer/learned Commissioner of Income-tax (Appeals) is the incidental benefit to the assessee which has been considered to be of enduring advantage. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider." (emphasis is ours) 15. We tend to agree with the analysis and conclusion arrived at by the Tribunal." 17. As we examine the nature of the transaction between an Indian subscriber and the assesse....