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ITA 211/HYD/2015

• Counselvise Citation: 21122514 RSA 2015
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-09-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G SURYA PRASAD
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business income; Double taxation relief; Non-deduction of tax
• Section: 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIAFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1967 & 1968/HYD/2014 ASSESSMENT YEARS 2011-2012 & 2012-2013 ACIT (TDS) CIRCLE - 2(1) (PREVIOUSLY DCIT, CIRCLE15(1), HYDERABAD. VS. M/S. PLANET ONLINE P. LTD., SECUNDERABAD. PAN AAECS1624F (APPELLANT) (RESPONDENT) ITA.NO.210 & 211/HYD/2015 ASSESSMENT YEARS 2011-2012 & 2012-2013 M/S. PLANET ONLINE P. LTD., SECUNDERABAD. PAN AAECS1624F VS. D CIT , CIRCLE - 15 ( 2 ) HYDERABAD. (APPELLANT) (RESPONDENT) FOR REVENUE : MR. G. SURYA PRASAD FOR ASSESSEE : MR. P. MURALI MOHAN RAO DATE OF HEARING : 08 .0 9 .2015 DATE OF PRONOUNCEMENT : 13 . 11 .2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. THE ABOVE APPEALS ARE CROSS-APPEALS OF BOTH ASSESSEE AS WELL AS REVENUE FOR THE A.YS. 2011-12 A ND 2012-13. 2. BRIEF FACTS OF THE CASE ARE AS UNDER:- THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT FOR US BASED INSURANCE COMPANI ES; 2 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. DURING THE F.Y. 2011-12, A SURVEY ACTION UNDER SECT ION 133A OF THE ACT WAS CARRIED OUT AT THE ASSESSEES B USINESS PREMISES ON 21.02.2012 TO VERIFY THE TDS COMPLIANCE BY THE ASSESSEE. THEREAFTER, IN THE LIGHT OF REVELATIO NS OF THE SURVEY AND EXAMINATION OF THE MATERIAL FURNISHED IN THE COURSE OF PROCEEDINGS UNDER SECTION 201(1) AND 201( 1A) OF THE I.T. ACT, THE A.O. OBSERVED AS UNDER : (I) LICENSE FEE :- (1) AN AMOUNT OF RS.1,11,08,623 IS SHOWN TO HAVE BEEN PAID UNDER THE HEAD LICENSE FEE FOR PURCHASE OF MICROSOFT LICENSE AGREEMENT. (2) THE A.O. OBSERVED THAT THE LICENSES ARE FOR USE OF MICROSOFT WINDOWS AND OTHER PROGRAMMES. ACCORDING TO THE A.O, THESE PROGRAMMES ARE MADE ACCORDING TO THE REQUIREMENT OF THE ASSESSEE AND THEREFORE, THE AMOUNT PAID BY THE ASSESSEE IS ROYALTY AND THE TDS OUGHT TO HAVE BEEN MADE UNDER SECTION 194J(1)(C) OF THE I.T. ACT. (II) SODEXO COUPONS : 2.1. IT WAS NOTICED THAT THE ASSESSEE HAD GIVEN EVERY EMPLOYEE FREE LUNCH COUPONS OF RS.700 IRRESPE CTIVE OF THEIR CADRE AND SUCH EXPENDITURE HAS BEEN BORNE BY THE COMPANY AND IS NOT INCLUDED IN THE SALARY OF TH E EMPLOYEES. HE HELD THAT THE SODEXO COUPONS ARE IN T HE NATURE OF A PRE-DETERMINATION CONTRACT UNDERTAKEN B Y 3 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. SODEXO TO HONOR THE CONTRACT WHICH IS A FIDUCIARY OBLIGATION AND THEREFORE, THE PROVISIONS OF SECTION 194C OF THE ACT ARE ATTRACTED. (III) BANDWIDTH CHARGES :- THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.25,98,629 AS PAID TOWARDS BAND WIDTH CHARGES CLAIMING IT TO BE THE PAYMENTS TOWARDS INTERNET CONNECTIONS. THE A.O. HELD THAT SUCH SERVICES ENJOY ED BY THE ASSESSEE ARE IN THE NATURE OF TECHNICAL SERVICE S ATTRACTING THE PROVISIONS OF SECTION 194J(1B) OF TH E ACT. SINCE THE ASSESSEE HAS FAILED TO COMPLY WITH THE SA ID TDS PROVISIONS, HE HELD THAT THE PROVISIONS OF SECTION 201(1) AND 201(1A) ARE ATTRACTED. HE ACCORDINGLY, MADE THE DISALLOWANCE AND ALSO BROUGHT THE INTEREST TO TAX. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ORDER OF THE A.O. WITH REGARD TO THE LICENSE FEE PAYMENTS AS WELL AS THE S ODEXO COUPONS AND GRANTED RELIEF OF DELETING THE DISALLOW ANCE ON ACCOUNT OF BAND WIDTH CHARGES. AGAINST THE CONFIRMATION OF THE ADDITIONS MADE BY THE A.O., ASS ESSEE IS IN APPEAL BEFORE US AND AGAINST THE RELIEF GRANT ED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE ASSESSEES SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ALL THE THREE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE 4 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. DECISION OF THIS TRIBUNAL IN VARIOUS CASES. HE HAS FILED COPIES OF THE ORDERS OF THE TRIBUNAL BEFORE US. 5. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW ON ALL THE ISSUES A ND ALSO HELD THAT THE LD. CIT(A) HAS ERRONEOUSLY ALLOWED TH E RELIEF ON ACCOUNT OF BAND WIDTH CHARGES EVEN THOUGH THEY A RE IN THE NATURE OF PROFESSIONAL AND TECHNICAL SERVICES. 6. HAVING HEARD THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT ON THE ISSUE OF APPLICABILITY OF TDS PROVISIONS TO BANDWIDTH CHARGE S, THIS TRIBUNAL IN THE CASE OF M/S. USHODAYA ENTERPRISES P . LTD., HYDERABAD IN ITA.NO.1820 & 1821/HYD/2014 AND ITA.NOS.1858 & 1859/HYD/2014 DATED 24.04.2015 FOR T HE A.YS. 2002-03 AND 2003-04 AT PARA-11 OF ITS ORDER H AS HELD AS UNDER : 11. AS REGARDS THE ISSUE INVOLVED IN GROUND 4 RELATING TO NON-DEDUCTION OF TAX AT SOURCE ON PAYME NT OF BAND WIDTH CHARGES, LEARNED REPRESENTATIVES FOR BOTH THE SIDES HAVE AGREED THAT IT IS COVERED BY TH E DECISION OF THE TRIBUNAL DATED 23.3.2012 IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2004-05 TO 2006-07 IN ITA NO.1699 TO 1701/HYD/2008 AND 1706 TO 1708/HYD/2008. THE TRIBUNAL FOR THOSE YEARS HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE VIDE PARA 17 OF IT S ORDER DATED 23.3.2012, WHICH READS AS FOLLOWS - '17. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI SHIVA KUMAR RELIED ON THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF PACIFIC INTERNET (INDIA) P LTD. VS. ITO 318 ITR (AT) 0197 MUM WHEREIN IT HAS BEEN HELD 5 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. THAT PAYMENT MADE FOR USING BANDWIDTH AND NETWORK OPERATION ARE NOT TECHNICAL SERVICES AND TAX NEEDED NOT BE DEDUCTED FROM SUCH PAYMENTS U/S.194J. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS NOW SETTLED THAT MERE PROVISION OF FACILITY TO USE EQUIPMENT, WHATEVER MAY BE THE SOPHISTICATION THAT WENT INTO THE CREATION OF SUCH FACILITY, IS NOT TECHNICA L SERVICE. FOLLOWING DECISION OF THE COORDINATE BENCH IN PACIFIC INTERNET (INDIA) P LTD. VS. ITO 318 ITR (AT) 0197 MUM. WE UPHOLD THE ORDER OF THE CIT(A) THAT PAYMENTS OF BANDWIDTH ARE NOT LIABLE FOR TDS UNDER SECTION 194J AND DISMISS THE DEPARTMENTAL APPEAL ON THIS ISSUE. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE YEARS UNDER CONSIDERATION BEING SIMILAR TO THOSE CONSIDER ED BY THE TRIBUNAL IN THE ABOVE DECISION FOR THE ASSESSMENT YEARS 2004-05 TO 2006-07, RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE, AND DISMISS GROU ND NO.4 OF THE REVENUE IN THESE APPEALS. 6.1. FACTS AND CIRCUMSTANCES IN THE CASE BEFORE US BEING THE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH, WE HOLD THAT THE BAND WIDTH CHARG ES ARE NOT LIABLE FOR TDS UNDER SECTION 194J AND DISMI SS THE DEPARTMENTAL APPEAL ON THIS ISSUE. ACCORDINGLY, ITA.NOS.1967 & 1968/HYD/2014 OF REVENUES APPEALS A RE DISMISSED. 7. AS REGARDS THE APPLICABILITY OF TDS PROVISIONS TO SODEXO COUPONS IS CONCERNED, WE FIND THAT THIS I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. RE LIANCE INDUSTRIES (2008) 175 TAXMAN 367 (GUJ.) WHEREIN IT WAS 6 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. HELD THAT SODEXO COUPONS GIVEN BY AN EMPLOYER TO TH E EMPLOYEE ARE NOT AMENABLE TO TDS PROVISIONS. RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE IS DECI DED IN FAVOUR OF THE ASSESSEE AND THE ORDER OF THE A.O. AN D LD. CIT(A) IS SET ASIDE. 9. AS REGARDS THE PAYMENTS MADE TOWARDS PURCHASE OF SOFTWARE LICENSES IS CONCERNED, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF A BENCH OF THIS TRIBUNAL IN THE CASE OF ADIT (INT. TAXATION) VS. M/S. BATRONICS INDIA LTD., HYDE RABAD IN ITA.NO.918/HYD/2010 DATED 27.01.2014 WHEREIN AT PAR A 38 TO 49 OF ITS ORDER THE TRIBUNAL HAS HELD AS UNDE R : 38. THE AGREEMENTS SHOW THAT THE LICENSE IS NON- EXCLUSIVE, NON-TRANSFERABLE AND THE SOFTWARE HAS TO BE USED IN ACCORDANCE WITH THE AGREEMENT. IT IS ALSO STIPULATED THAT THE COPY SO MADE SHALL INCLUDE INTRA ASIA TRADING (P) LTDS COPYRIGHT AND OTHER PROPRIETARY NOTICES. ALL COPIES OF THE SOFTWARE ARE THE EXCLUSIVE PROPERTY OF INTRA ASIA TRADING (P) LT D.. THE SOFTWARE INCLUDES A LICENCE AUTHORISATION DEVICE, WHICH RESTRICTS THE USE OF THE SOFTWARE. TH E SOFTWARE IS TO BE USED ONLY FOR LICENSEE S OWN BUSINESS AS DEFINED WITHIN THE INTRA ASIA TRADING (P) LTD. LICENCE SCHEDULE. 39. IN ORDER TO QUALIFY AS ROYALTY PAYMENT, IT IS NECESSARY TO ESTABLISH THAT THERE IS TRANSFER OF AL L OR ANY RIGHTS (INCLUDING THE GRANTING OF ANY LICENC E) IN RESPECT OF COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK. IN ORDER TO TREAT THE CONSIDERATIO N PAID BY THE LICENSEE AS ROYALTY, IT IS TO BE ESTABLISHED THAT THE LICENSEE, BY MAKING SUCH PAYMENT, OBTAINS ALL OR ANY OF THE COPYRIGHT RIGHTS OF SUCH LITERARY WORK. DISTINCTION HAS TO BE MADE BETWEEN THE ACQUISITION OF A 'COPYRIGHT RIGHT' AND A 'COPYRIGHTED ARTICLE'. COPYRIGHT IS DISTINCT FROM THE 7 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. MATERIAL OBJECT, COPYRIGHTED. COPYRIGHT IS AN INTANGIBLE INCORPOREAL RIGHT IN THE NATURE OF A PRIVILEGE, QUITE INDEPENDENT OF ANY MATERIAL SUBSTANCE, SUCH AS A MANUSCRIPT. JUST BECAUSE ONE HAS THE COPYRIGHTED ARTICLE, IT DOES NOT FOLLOW THA T ONE HAS ALSO THE COPYRIGHT IN IT. IT DOES NOT AMOU NT TO TRANSFER OF ALL OR ANY RIGHT INCLUDING LICENCE I N RESPECT OF COPYRIGHT. COPYRIGHT OR EVEN RIGHT TO US E COPYRIGHT IS DISTINGUISHABLE FROM SALE CONSIDERATIO N PAID FOR COPYRIGHTED ARTICLE. THIS SALE CONSIDERATION IS FOR PURCHASE OF GOODS AND IS NOT ROYALTY. 40. THE LICENSE GRANTED BY THE ASSESSEE IS LIMITED TO THOSE NECESSARY TO ENABLE THE LICENSEE TO OPERAT E THE PROGRAM. THE RIGHTS TRANSFERRED ARE SPECIFIC TO THE NATURE OF COMPUTER PROGRAMS. COPYING THE PROGRAM ONTO THE COMPUTER'S HARD DRIVE OR RANDOM ACCESS MEMORY OR MAKING AN ARCHIVAL COPY IS AN ESSENTIAL STEP IN UTILIZING THE PROGRAM. THEREFORE, RIGHTS IN RELATION TO THESE ACTS OF COPYING, WHERE THEY DO NO MORE THAN ENABLE THE EFFECTIVE OPERATION OF THE PROGRAM BY THE USER, SHOULD BE DISREGARDED IN ANALYZING THE CHARACTER OF THE TRANSACTION FOR T AX PURPOSES. PAYMENTS IN THESE TYPES OF TRANSACTIONS WOULD BE DEALT WITH AS BUSINESS INCOME IN ACCORDANCE WITH ARTICLE 7. 41. 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 RELATI ON 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 CANNOT BE CONSTRUED AS AN AUTHORITY TO ENJOY ANY OR ALL OF T HE ENUMERATED RIGHTS INGRAINED IN ARTICLE 12 OF DTAA. WHERE THE PURPOSE OF THE LICENCE OR THE TRANSACTION IS ONLY TO RESTRICT USE OF THE COPYRIGHTED PRODUCT FOR INTERNAL BUSINESS PURPOSE, IT WOULD NOT BE LEGALLY CORRECT TO STATE THAT THE COPYRIGHT ITSELF OR RIGHT TO USE COPYRIGHT HAS BEEN TRANSFERRED TO ANY EXTENT. 8 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. THE PARTING OF INTELLECTUAL PROPERTY RIGHTS INHEREN T IN AND ATTACHED TO THE SOFTWARE PRODUCT IN FAVOUR O F THE LICENSEE/CUSTOMER IS WHAT IS CONTEMPLATED BY THE TREATY. MERELY AUTHORIZING OR ENABLING A CUSTOMER TO HAVE THE BENEFIT OF DATA OR INSTRUCTION S CONTAINED THEREIN WITHOUT ANY FURTHER RIGHT TO DEAL WITH THEM INDEPENDENTLY DOES NOT, AMOUNT TO TRANSFER OF RIGHTS IN RELATION TO COPYRIGHT OR CONFERMENT OF THE RIGHT OF USING THE COPYRIGHT. THE TRANSFER OF RIGHTS IN OR OVER COPYRIGHT OR THE CONFERMENT OF THE RIGHT OF USE OF COPYRIGHT IMPLIES THAT THE TRANSFEREE/LICENSEE SHOULD ACQUIRE RIGHTS EITHER IN ENTIRETY OR PARTIALLY CO-EXTENSIVE WITH T HE OWNER/ TRANSFEROR WHO DIVESTS HIMSELF OF THE RIGHTS HE POSSESSES IN HIS FAVOUR. 42. THE LICENSE GRANTED TO THE LICENSEE PERMITTIN G HIM TO USE THE PROGRAMME FOR ITS BUSINESS PURPOSE IS ONLY INCIDENTAL TO THE FACILITY EXTENDED TO THE LICENSEE TO MAKE USE OF THE COPYRIGHTED PRODUCT FOR ITS INTERNAL BUSINESS PURPOSE. THE SAID PROCESS IS NECESSARY TO MAKE THE PROGRAMME FUNCTIONAL AND TO HAVE ACCESS TO IT AND IS QUALITATIVELY DIFFERENT FR OM THE RIGHT CONTEMPLATED BY THE SAID PARAGRAPH BECAUSE IT IS ONLY INTEGRAL TO THE USE OF COPYRIGHT ED PRODUCT. APART FROM SUCH INCIDENTAL FACILITY, THE LICENSEE HAS NO RIGHT TO DEAL WITH THE PRODUCT JUST AS THE OWNER WOULD BE IN A POSITION TO DO. 43. 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 F OR 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. 44. THE LICENSEES ARE NOT ALLOWED TO EXPLOIT THE COMPUTER SOFTWARE COMMERCIALLY, THEY HAVE ACQUIRED UNDER LICENCE AGREEMENT, ONLY THE COPY RIGHTED SOFTWARE WHICH BY ITSELF IS AN ARTICLE AND THEY HAVE NOT ACQUIRED ANY COPYRIGHT IN THE SOFTWARE. IN THE CASE OF THE ASSESSEE COMPANY, THE LICENSEE TO WHOM THE ASSESSEE COMPANY HAS SOLD/LICENSED THE SOFTWARE WERE ALLOWED TO MAKE ONLY ONE COPY OF THE SOFTWARE AND ASSOCIATED 9 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. SUPPORT INFORMATION FOR BACKUP PURPOSES WITH A CONDITION THAT SUCH COPYRIGHT SHALL INCLUDE INTRA ASIA TRADING (P) LTD. COPYRIGHT AND ALL COPIES OF T HE SOFTWARE SHALL BE EXCLUSIVE PROPERTIES OF INTRA ASI A TRADING (P) LTD. LICENSEE 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 T O ANY THIRD PARTY WITHOUT THE CONSENT OF INTRA ASIA TRADING (P) LTD. 45. THE LICENSEE HAS BEEN PROHIBITED FROM COPYING, DE-COMPILING, DE-ASSEMBLING, OR REVERSE ENGINEERING THE SOFTWARE WITHOUT THE WRITTEN CONSENT OF INTRA ASIA TRADING (P) LTD. 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 LICENSEE WERE OWNED BY INTRA ASIA TRADING (P) LTD. AND ONLY INTRA ASIA TRADING (P) LTD. 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 AUTHORIZATION DEVICE TO INTRA ASIA TRADING (P) LTD. . 46. THE INCORPOREAL RIGHT TO THE SOFTWARE I.E. COPYRIGHT REMAINS WITH THE OWNER AND THE SAME WAS NOT TRANSFERRED BY THE ASSESSEE. THE RIGHT TO USE A COPYRIGHT IN A PROGRAMME IS TOTALLY DIFFERENT FROM THE RIGHT TO USE A PROGRAMME EMBEDDED IN A SOFTWARE AND THE PAYMENT MADE FOR THE SAME CANNOT BE SAID TO BE RECEIVED AS CONSIDERATION FOR THE USE OF OR RIGHT TO USE OF ANY COPYRIGHT TO BRIN G IT WITHIN THE DEFINITION OF ROYALTY AS GIVEN IN THE DTAA. WHAT THE LICENSEE HAS ACQUIRED IS ONLY A COPY OF THE COPYRIGHT ARTICLE WHEREAS THE COPYRIGHT REMAINS WITH THE OWNER AND THE LICENSEES HAVE ACQUIRED A COMPUTER PROGRAMME FOR BEING USED IN THEIR BUSINESS AND NO RIGHT IS GRANTED TO THEM TO UTILIZE THE COPYRIGHT OF A COMPUTER PROGRAMME AND THUS THE PAYMENT FOR THE SAME IS NOT IN THE NATURE OF ROYALTY. 10 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. 47. WE HAVE NOT EXAMINED THE EFFECT OF THE SUBSEQUENT AMENDMENT TO SECTION 9 (1)(VI) OF THE ACT AND ALSO WHETHER THE AMOUNT RECEIVED FOR USE OF SOFTWARE WOULD BE ROYALTY IN TERMS THEREOF FOR THE REASON THAT THE ASSESSEE IS COVERED BY THE DTAA, THE PROVISIONS OF WHICH ARE MORE BENEFICIAL. THE AMOUNT RECEIVED BY THE ASSESSEE UNDER THE LICENCE AGREEMENT FOR ALLOWING THE USE OF THE SOFTWARE IS NOT ROYALTY UNDER THE DTAA. 48. WHAT IS TRANSFERRED IS NEITHER THE COPYRIGHT IN THE SOFTWARE NOR THE USE OF THE COPYRIGHT IN THE SOFTWARE, BUT WHAT IS TRANSFERRED IS THE RIGHT TO U SE THE COPYRIGHTED MATERIAL OR ARTICLE WHICH IS CLEARL Y DISTINCT FROM THE RIGHTS IN A COPYRIGHT. THE RIGHT THAT IS TRANSFERRED IS NOT A RIGHT TO USE THE COPYRIGHT BUT IS ONLY LIMITED TO THE RIGHT TO USE T HE COPYRIGHTED MATERIAL AND THE SAME DOES NOT GIVE RISE TO ANY ROYALTY INCOME AND WOULD BE BUSINESS INCOME. 49. IN VIEW OF ELABORATE DISCUSSION AND IN THE LIGHT OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT VS. INFRASOFT LTD. (SUPRA) , ON WHICH RELIANCE PLACED BY THE LEARNED AR, IN THE PRESENT CASE, THE ASSESSEE HAS ACQUIRED A READYMADE OFF THE SHELF COMPUTER PROGRAMME TO BE USED IN THEIR BUSINESS AND NO RIGHT WAS GRANTED TO THE ASSESSEE TO UTILIZE THE COPY RIGHT OF THE PROGRAMME AND, THEREFORE, CONSIDERATION CANNOT BE TREATED AS ROYALTY. AS HELD BY THE CIT(A), THE PAYMENTS MADE BY THE ASSESSEE COMPANY CANNOT BE HELD AS ROYALTIES COMING INTO THE AMBIT OF ARTICLE 12 OF DTAA OR FEE FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE IT ACT AND ACCORDINGLY NO TAX NEED TO BE DEDUCTED U/S 195 OF THE IT ACT. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) ON THIS COUNT AND DISMISS THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD. 9.1. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE PAYMENTS FOR PURCHASE OF LICENSE IS NOT ROYALTY AND IS THEREFORE, NOT AMENABLE TO THE TDS PROVISIONS. 11 ITA.NOS.1967 & 1968/HYD/2014, ITA.NOS.210 & 211/HYD/2015 M/S. PLANET ONLINE P. LTD., HYDERABAD. 10. IN THE RESULT, ASSESSEES APPEALS ARE TREATED AS ALLOWED. 11. TO SUM-UP, APPEALS OF THE REVENUE ARE DISMISSED AND APPEALS OF THE ASSESSEE ARE TREATED A S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2015. SD/- SD/- (S. RIAFAR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 13 TH NOVEMBER, 2015 VBP/- COPY TO : 1. ACIT (TDS), CIRCLE 2(1), HYDERABAD (PREVIOUSLY DCIT , CIRCLE 15(1), 4 TH FLOOR, ROM NO. 442, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2 . D C I T , C I R C L E 1 5 ( 2 ) , H Y D E R A B A D . 3 . M/S. PLANET ONLINE P. LTD., UNIT 603/604, ASHOK BHOOPAL CHAMBERS, S.P. ROAD, SECUNDERABAD. 4 . CIT(A) - I I, HYDERABAD 5 . CIT - (TDS) , HYDERABAD 6 . D.R. ITAT B BENCH, HYDERABAD. 7 . GUARD FILE