TaxTMI 
TaxTMI 
2026 (1) TMI 241
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....g to the Appellant, re-characterized the said consideration as "process royalty" in the directions dated 27.12.2024. 1.2 As per Section 144C(11) of the Income Tax Act, the Ld. DRP is mandated to provide an opportunity of being heard before issuing directions under sub-section (5). Since this fundamental requirement has not been met. the directions are liable to be set aside. Reliance is placed on the judgments of the Hon'ble Supreme Court in Sahara India (Firm) v. Commissioner of Income Tax, Central-I (2008) 226 E.L.T. 22 (S.C.), and the Hon'ble Madras High Court in M/s Delphi-TVS Diesel Systems Limited v. ITO & Others, WP No. 26313 of 2017. Ground 2- The Ld. A0 and Ld. DRP violates the Principle of Consistency and Judicial Discipline. 2.1 The Ld. AO and Ld. DRP grossly erred in once again re-characterizing the transaction concerning income from the sale of software as royalty, and income from maintenance support and training services as FTS. 2.2 This Hon'ble Tribunal, in the Appellant's own case in ITA 9428/DEL/2019, ITA/2020/DEL/2022, and ITA/2021/DEL /2022, has consistently held that income from the sale of software licenses is nei....
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....the facts and circumstances involved are the same and must follow the past rulings. Further, it is also established that, the binding precedents from the higher forums has to be adhered to. In this regard, reliance is placed on the judgments of the Hon'ble Supreme Court in Radhasoami Satsung v. Commissioner of Income-tax /1992) 60 Taxman 248 (SC) and Union of India v. Kamlakshi Finance Corporation Ltd. 1991 (55) E.L. T. 433 (S.C.). Ground 3 - The Ld. DRP and Ld. AO erred in treating the income from sale of software licenses as royalty. 3.1 The Ld. DRP and Ld. AO erred in treating the software licenses as process royalty, alleging that the Appellant provided a "secret formula" to its customers, without adducing any supporting evidence. 3.2 It is respectfully submitted that no such "secret formula" has been provided by the Appellant to any of its customers. The software sold by the Appellant consists of standard, non-customizable solutions related to data protection, data management, and data recovery. There is no transfer of any copyrights, technical knowledge, blueprints, or proprietary 2. Grounds of appeal no.1 and 2 are against the viola....
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....copy basis. * Consumption-based license-ExSP: ExSP is a time-based license sold to managed service providers only. Related fees are generally based solely on usage, however, some agreements do have quarterly/annual minimums. ExSP contracts stipulate quarterly reporting to Veritas. Sale of hardware appliances: Appliances are enterprise backup servers with expandable storage and intelligent end-to-end deduplication for physical and virtual environments. Veritas appliances are available for Net backup, Velocity, and eDiscovery product lines. Appliances are typically bundled with appliance support and installation services. Maintenance and support services: a) Software maintenance and support: These include technical support services and unspecified updates, upgrades, and enhancements. They are provided in two tiers- Basic and Essential maintenance. The updates, upgrades, and enhancements generally do not significantly modify the software and generally either increase the efficiency of the existing core functionality or provide additional non-core features and functionalities or provide patches and bug fixes. b) Appliance maintenance support....
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....to be taxed as FTS/FIS under Article 12(4)(a) of the India-Singapore DTAA." 6. With respect to ground 3, the Id counsel of the assessee, with respect to Maintenance support and other services Education and training services as FTS, submitted that these services are provided in connection with the utilization of software which are intricately and inextricably associated. The Id AR further submitted that when the income from the sale of the software is not taxable, income from the sale of related services could not be held as FTS as held by this Hon'ble Tribunal in the case of TSYS Card Tech Ltd v DOT, Circle- 3(1)(1), International Taxation, New Delhi, ITA 2006/DEL/2022. It is also submitted that the said transactions do not satisfy the 'make available clause as per Article 12(4)(b) of the India -Singapore DTAA. 7. Per contra, the Id. DR did not raise any serious objection. The Id DR relied upon the order of the Assessing Officer/DRP. 8. We have heard the rival submissions and have perused the relevant material on record. We have carefully considered the orders of the authorities below. We find that the Maintenance support and other services as well as Education and....
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....vices from a distinct set of receipts which need to be examined independently in terms of their taxability or otherwise under specific Article 13 (Royalty/FTS) and cannot be clubbed as business income under Article 7 of the DTAA. The Id DRP held that taxable under Article 13 India-UK DTAA under the head 'FTS'. The Id DRP held that the make available dause under Article 13 are also stand satisfied. The main argument taken before us is that the other related services provided are in connection with utilization of the software (PRIME) which are intricately and extricably associated. The services are in respect of training programme and updations in connection with utilization of the software PRIME. Hence, we hold that when software itself is not taxable the training and the related activities concerned with utilization anc installation cannot be held to be FTS. Further, simply latching on to use of words "Make Available" in the agreement, it cannot be said that conditions of Article 13(4)(c) are satisfied. Burden is on the Revenue to demonstrate that make available condition is satisfied. Appeal of the assessee on Ground Nos. 4 and 5 are allowed." 8. On perusal of the....