TaxTMI 
TaxTMI 
2024 (7) TMI 1779
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....mplementation enhancement, annual maintenance, consultancy service, training and other related activities are not taxable as FTS being related to software (PRIME) which is itself not taxable, without appreciating the fact that these services involve human intervention and skill entail application of the technology contained therein to enable the end users to independently use the products and considering the technical expertise involved in such service in respect of specialize products, these service duly make the technical knowledge, experience and know how available to the user? 2.2 Whether on the facts and circumstances of the case, Ld. ITAT has erred in clubbing the software and related service like training and related activities without appreciating the fact that the nature of both the receipt are different and their treatment for the tax purpose has to be decided according to their nature only? 2.3 Whether on the facts and circumstances of the case, Ld. ITAT has erred in holding that revenue earned by the Assessee from the Indian Customer on account of provisions of software (PRIME) related service including implantation, Enhancement, annual maintenance, co....
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....Dispute Resolution Panel ['DRP'], pursuant to which a final rectified assessment order was framed by the AO on 19 December 2022 which gave effect to the directions of the DRP and assessed the total income at INR 12,08,55,698/-. 6. The impugned order of the Tribunal deleted the additions made by the AO and allowed the appeal of the respondent-assessee, observing that training and related activities concerned with utilisation and installation of software cannot be held to be FTS when the software itself is not taxable. It was additionally held that the sum of INR 7,24,821/- was incorrectly taxed as FTS despite the said issue being remanded to the AO for verification of reimbursement of the aforenoted amount as travelling and lodging expenses. 7. The pertinent observations of the Tribunal are being reproduced hereinbelow:- "8. Having gone through the agreement since the user has no right to make copies or commercially exploit the right in the copyright of such software the ld. DRP following the ratio laid down by Hon'ble Supreme Court in the context of Business Income/Royalty in Engineering Analysis Centre of Excellence Private Ltd. Vs. CIT (Civil Appeal Nos. 8....
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....he same would have to be answered in favour of the respondent-assessee bearing in mind the judgment rendered by the Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd. v. CIT [(2022) 3 SCC 321]. 9. We deem it apposite to extract the following pertinent observations rendered in Engineering Analysis: "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....
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....r distinction that must be recognised to exist between the transfer of a copyright and the mere grant of the right to use and take advantage of copyrighted material. Neither the subscription agreement nor the advantages accorded to a subscriber can possibly be considered in law to be a transfer of a copyright. In fact, it was the categorical assertion of the assessee that the copyright remains with it at all times. 12. This issue in any case no longer appears to be res integra in light of the judgment of this Court in Director of Income Tax Vs. Infrasoft. We deem it apposite to extract the following passages from that decision:- "89. There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angle, a non-exclusive and non-transferable licence enabling the use of a copyrighted product....
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....mpany has sold/licenced the software were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Infrasoft copyright and all copies of the software shall be exclusive properties of Infrasoft. Licencee was allowed to use the software only for its own business as specifically identified and was not permitted to loan/rent/sale/sub-licence or transfer the copy of software to any third party without the consent of Infrasoft. 93. The licencee has been prohibited from copying, de-compiling, de-assembling, or reverse engineering the software without the written consent of Infrasoft. The licence agreement between the Assessee Company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licencee were owned by Infrasoft and only Infrasoft has the power to grant licence rights for use of the software. The licence agreement stipulates that upon termination of the agreement for any reason, the licencee shall return the software including supporting information and licence authorisation device to Infrasoft. 94. The i....