TaxTMI 
TaxTMI 
2026 (8) TMI 1572
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....ieved by the action of the Assessing Officer in treating two payments made to non-residents as sums chargeable to tax in India and, consequently, holding the assessee to be an assessee in default for failure to deduct tax under section 195. The first payment of Rs.22,94,510 was made to Aspen Technology Inc., USA towards licence of software, which has been treated by the Assessing Officer as royalty. The second payment of Rs.6,44,347 was made to Dekom AG, Germany, which has been treated as fees for technical services. The assessee's case, on the other hand, is that the first payment was merely for a limited right to use copyrighted software without acquisition of any right in the copyright, whereas the second payment was predominantly for pu....
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....essee was merely permitted to use the copyrighted software for its internal business purposes. The licence was expressly nonexclusive, non-transferable and non-sublicensable. The title, copyright and all proprietary rights in the software continued throughout to vest in Aspen Technology Inc. The assessee could neither commercially exploit nor transfer, sublicense, modify, adapt, reverse-engineer or create derivative works from the software. Thus, there was no grant of any right in a copyright so as to fall within Article 12(3) of the India-USA DTAA. Reliance was principally placed upon the judgment of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT, (2021) 432 ITR 471 (SC). 5. We have heard the par....
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....le, preserves the proprietary domain of the copyright owner and merely enables the assessee to operate the software as an end-user. 7. Article 12(3)(a) of the India-USA DTAA, insofar as relevant, contemplates consideration for the use of, or right to use, copyright of a literary, artistic or scientific work, patent, trademark, design or model, plan, secret formula or process or information concerning industrial, commercial or scientific experience. What is material, therefore, is not merely that the assessee has been permitted to use a software product, but whether the payment is consideration for use of, or right to use, the copyright or any other intellectual-property right enumerated in the Article. A copyrighted article and the copyr....
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.... made to Dekom AG, Germany. The learned counsel submitted that the very factual foundation on which the Assessing Officer proceeded is erroneous. The payment was not for clinical research trials or any independent research or consultancy activity. It arose from purchase of a videoconferencing system, namely AVAYA SCOPIA XT5000 and associated products, which were supplied and installed in Germany for use by a Scientific Advisory Board Member. Our attention was drawn specifically to the order confirmation placed at page 196 of the paper book. 10. We have examined the said contemporaneous document. The Order Confirmation No. 49931 dated 25.09.2018 issued by Dekom AG furnishes a clear description and breakup of the transaction. It records EU....
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....lied product. Therefore, the approach of the Assessing Officer in treating the entire payment of Rs.6,44,347 as consideration for technical services, much less on the premise that it pertained to clinical research trials, is not borne out from the material on record. The order confirmation itself belies such an inference. At the same time, however, the order confirmation separately identifies an amount of EUR890 towards "installation, setup and training", which, inter alia, comprised installation at site, commissioning, training of the system administrator and users and deployment of configuration templates and recommendations. Thus, unlike the consideration attributable to the equipment, this amount has been separately earmarked for rendit....
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....the India- Germany DTAA. We, therefore, without entering into any larger question as to whether installation or training services of this nature would, in every case, constitute fees for technical services, accept the said position and hold that, for the purposes of the present appeal alone, the amount of EUR890 separately attributable to installation, setup and training may be subjected to withholding tax at the applicable treaty rate. 15. We make it explicit that the aforesaid conclusion in relation to EUR890 rests upon the peculiar facts of the present case, the absence of sufficient material before us demonstrating the precise nature and scope of the training and allied services, and the fair concession made by the learned counsel ha....