TaxTMI 
TaxTMI 
2026 (9) TMI 1545
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....rising out of these two grounds relates to the nature and character of subscription fee received by the assessee, whether in the nature of royalty u/s. 9(1)(vi) of the Act read with Article 12(3) of the India-Ireland Double Taxation Avoidance Agreement ('DTAA' for short). 3. The relevant facts for deciding this issue, briefly stated are, the assessee is a non-resident corporate entity incorporated in Ireland and is a tax resident of that country. As stated by the Assessing Officer ('A.O.' for short), the assessee is working as a Rest of the World ('ROW') seller of Slack software- a communication software. The assessee sells/supplies the software on subscription basis. In the returns of income filed for the impugned assessment years, the assessee did not offer the subscription charges amounting to Rs. 14,48,49,742/- and Rs. 74,11,37,632/- respectively, claiming that the receipts are not in the nature of royalty either u/s. 9(1)(vi) of the Act or under Article 12(3) of India-Ireland DTAA. While claiming so, the assessee relied upon the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Private Limited vs. CIT and Ors. [2021] 432 ITR 471 (SC)....
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....ning, ld. DRP ultimately concluded that the receipts are in the nature of royalty. Based on the directions of learned DRP, the assessments were finalized. 6. Before us, learned counsel appearing for the assessee explained the exact functioning of the Slack software. She submitted, the software is nothing but an online platform for communication on subscription basis. She submitted, by using the platform, a subscriber can host a meeting, share messages, files, etc. She submitted, by choosing various subscription plans/packages a subscriber can access the platform using login ID credentials. She submitted, the assessee has given subscription to third-party customers in India simply for use of the platform and the facilities provided therein. No proprietary rights relating to the software were either transferred to the assessee nor any right to use the copyright was transferred. In this context, learned counsel drew our attention to the customer terms of services placed in the paper book. Referring to the terms and conditions contained therein, she submitted that the ownership of the copyrights and all related intellectual property rights are nontransferable and non-exclusive. She ....
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.... [ITA No. 702/Del/202i (Delhi Tribunal)] (Para 25 -29) 12 Datamine International Ltd. v. ADIT [(2016) 48 ITR(T) 229 (Delhi Tribunal)] (Para 11) 7. Strongly relying upon the observations of the AO and ld. DRP, ld. DR submitted that the customer/subscriber in India is not merely receiving the software, but it is receiving communication services, collaboration services, hosting, security, data storage, workflow management, continuous backend functionality. He submitted, every time a user creates channels, stores files, searches conversations, invokes integrations, routes messages and accesses archives, it is not merely receiving a passive output, but actively invoking Slack's proprietary communication processes. Therefore, the customer's interaction with the platform is itself the use of the process. Thus, he submitted that the use of process would qualify as 'royalty' both u/s. 9(1)(vi) of the Act and Article 12(3) of India-Ireland DTAA. 8. We have given a thoughtful consideration to rival contentions and perused the materials on record. We have also applied our mind to the judicial precedents cited before us. Undisputedly, the assessee is the creator/developer/owner ....
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....vices through Digital Processes in real time. Such service has been rendered on account with the use of experience, expertise and technology and secret processes with Intellectual Property Rights vested in the applicant. 11. Before we deal with the acceptability or otherwise of the reasoning of learned DRP, it is necessary to observe, post COVID-19 there has been a paradigm shift in working system and conduct of business. The changed dynamics compelled not only the corporate world/private sector but even the Government/semi-Government establishments to adopt the culture of work-from-home. Business meetings, office work and judicial proceedings came to be conducted through virtual mode using various online platforms such as Cisco Webex, Zoom, Google Meet, etc. These platforms can be used through subscription either on annual basis or for a particular period. A subscriber is given access through subscription only for the use of the platform and the facilities provided therein. While providing access to the platform, the developer/owner of the software neither transfers the right to use the copyright or any intellectual property embedded therein to the subscriber. A subscriber is o....
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....riber/customer, the assessee has either transferred the source code or the intellectual property rights in the software. It is the reasoning of learned DRP that the assessee is providing high-end services through various digital processes. We fully concur with the observations of learned DRP that the assessee certainly is providing services to its customers/ subscribers through complex processes involved in the software. However, the moot question is, whether such processes are transferred to the subscribers/customers or the assessee itself is using the processes to provide services. The answer to the aforesaid question can be found in the observations of learned DRP, wherein, it has observed that the assessee has provided complex, technical, and value-added services through processes. In other words, the processes are used by the assessee and not the subscribers. In fact, ld. DRP has acknowledged that the assessee provides services with use of experience, expertise, technology and secret processes with Intellectual Property Rights vested with it. In other words, the assessee has not transferred the its experience, expertise, technology and secret processes to the subscriber. 14....
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....eo files, notes, etc. It would be preposterous to even assume that the persons using the platforms also have access to the technology or the processes involved in developing the software. 17. The issue can be further explained through a simple illustration. When a customer visits a fine dine restaurant and orders a gourmet dish, the cost the customer pays is of the dish and not the process involved in preparing the dish. Neither the service provider is obliged to reveal the process to the customer nor the customer is interested in acquiring the process that has gone into preparing the dish. What the customer wants is the finished product and not the process involved in creating the finished product. 18. In the facts of the present case, the customers/subscribers using assessee's software/ platform are more than hundred. The department has not even referred to a single instance of a customer to demonstrate that by subscribing to the license to use the software/platform, it has acquired ownership over the intellectual property rights embedded in the software to use it as owner of the copyright to modify, make value addition, replicate and exploit commercially. If we accept the ....
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.... Document 1 0. Bricniby what your an koking for ₱ Pwandaffillates B # new-channel a E 0 Get 55% off Slack Pro Home @ Threads 6ª G Huddles 2 Directories Q @ Chanek it all puandallFates & budget LAM # new-channel if scacial + Add charnek Chect messages Hicall Desal Create L Message Start a conversation in a OM or channel Channel Start a group conversation by sople Huddle Start a video or audis duat 0 Canwas Crous and share contest List Track and manage projects D Work flow Autorvote everyday tiks 8 Invite people Welcome to your first channel nimesh.agrawal! Channels in Slack keep wark fucuncul around a specific topk. You can keep all your information related projects attached to the channel so everyone can access. Invite teammates Add your wait Intry U Welcome your beam Pont a wekconst wwtakes Contect your apps Bring your work Into Six k 2000 Taday - esh.agrawal :40AM ed #new-channel. Albo, Hiroll Desal joined M. U Bnew chamel D A - Document 2 Free Drive productivity in one place Rs.0 INR per person/month, billed yea....