Moldtek Technologies Limited, Hyderabad V. DDIT(International Taxation)-I, Hyderabad

ITA 406/HYD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0297 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Double taxation relief; Opportunity of being heard; Deemed to accrue or arise in india; Retrospective amendment; Advance ruling
• Section: 10B; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHE A (SMC) : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 406/H/2012 2007 - 08 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. PAN AABCM9845R DY.DIT (INTERNATIONAL TAXATION)-I, HYDERABAD. 407/H/2012 2008 - 09 408/H/2012 2009 - 10 409/H/2012 2010 - 11 410/H/2012 2007 - 08 411/H/2012 2008 - 09 FOR ASSESSEE : MR. K.A. SAI PRASAD FOR REVENUE : MR. PRABHAT KUMAR GUPTA DATE OF HEARING : 2 4 .07.2015 DATE OF PRONOUNCEMENT : 29 .07.2015 ORDER THESE SIX APPEALS FILED BY THE ASSESSEE INVOLVING FOUR ASSESSMENT YEARS I.E., A.Y. 2007-08 TO 2010-11 ARE DIRECTED AGAINST THE SIX SEPARATE ORDER S PASSED BY THE LD. CIT(A)-V, HYDERABAD DATED 02.01.2 012 WHEREBY HE UPHELD THE ORDERS PASSED BY THE A.O. UND ER SECTION 201(1) AND 201(1A) OF THE ACT TREATING THE ASSESSEE AS IS IN DEFAULT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF RENDERING KPO SERVICES. DURING THE YEARS UNDER CONSIDERATION, IT HAD MADE PAYMENTS TO M/S. TEKLA CORPORATION, FINLAND (I N SHORT TEKLA) AND M/S. DESIGN DATA CORPORATION, USA (IN SHORT DDC) FOR THE PURCHASE OF SOFTWARE LICENSE. ACCORDING TO THE A.O. THESE PAYMENTS BEING IN THE N ATURE 2 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. OF ROYALTY, ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE THEREFROM. SINCE NO SUCH TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE COMPANY, IT WAS CALLED UPON BY THE A.O . TO SHOW CAUSE AS TO WHY ORDER UNDER SECTION 201(1) SHO ULD NOT BE PASSED TREATING IT AS THE ASSESSEE IN DEFAUL T FOR THIS FAILURE. IN REPLY, THE FOLLOWING EXPLANATION WAS OF FERED BY THE ASSESSEE IN WRITING VIDE ITS LETTER DATED 23.03 .2010. '2. THE COMPANY HAS PURCHASED CERTAIN SOFTWARE LICENSES OF THE FOLLOWING TYPES: (A) SDS/2 DETAILING SOFTWARE LICENSES FROM DESIGN DATA CORPORATION USA. (B) SDS/2DRAFTING SOFTWARE LICENSES FROM DESIGN DATA CORPORATION USA. (C) SDS/2 DETAILING REVIEW SOFTWARE LICENSES FROM DESIGN DATA CORPORATION USA. (D) STEEL DETAILING SOFTWARE USER LICENSES FROM TEKLA CORPORATION, FINLAND. (E) STEEL DETAILING SOFTWARE USER LICENSES FROM TEKLA CORPORATION, FINLAND. FOR YOUR FURTHER INFORMATION, SDS/2 IS A SOFTWARE UTILIZED MAINLY FOR STRUCTURAL ENGINEERING IN CIVIL OR MECHANICAL WORKS, AND AS PER THE NATIONAL BUILDING CODE OF THE USA, WHEREAS TEKLA SPECIALIZES IN STEEL STRUCTURAL ENGINEERING APPLICATIONS SUCH AS STEEL FRAMED STRUCTURES, PIPELINES, TRUSSES ETC. NOT CONNECTED WITH CEMENT AND BRICKS OR OTHER BUILDING MATERIALS. 3. THE SOFTWARE LICENSES PURCHASED FROM EACH OF THE ABOVE ARE SUBJECT TO THEIR BEING USED AT ONLY O NE 3 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. PC OR WORKSTATION. THIS MEANS THAT AT ANY POINT OF TIME ONLY ONE PERSON CAN WORK ON THE SAID SOFTWARE. FURTHER, THE USER LICENSE IS GRANTED ON A ONE TIME CHARGE BASIS AND ITS VALIDITY IS FOR LIFE IN T HE VERSION IN WHICH IT IS PURCHASED. SUBSEQUENTLY, IF THERE ARE ANY UPGRADES TO THE SAID SOFTWARE, AN UPGRADED VERSION USER LICENSE HAS TO BE SEPARATELY OBTAINED (ON PAYMENT OF A DIFFERENTIAL FEE) FOR USE. 4. THE SAID SOFTWARE IS INSTALLED IN THE SERVERS O F THE SUPPLIER AND CAN BE UTILIZED OR USED BY THE COMPANY ON THE BASIS OF A SUITABLE HARDWARE CUM SOFTWARE LOCK PROVIDED ON PAYMENT, WHEREBY ACCESS TO THE SAID SOFTWARE BY A USER IS PROVIDED BY THE SUPPLIER. 5. ALL THE SOFTWARE IS COPYRIGHTED BY THE SUPPLIER AND NO RIGHTS IN THIS REGARD ACCRUE TO THE COMPANY. IT MERELY HAS A RIGHT TO USE THE SAME ON PAYMENT. FROM THE ABOVE THE FOLLOWING ARE TRANSPARENT: A) THE-SUM PAID OR PAYABLE TO A NON RESIDENT OR A FOREIGN COMPANY SHOULD BE A SUM CHARGEABLE UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. B) TDS IS DEDUCTIBLE ON ANY PORTION OF THE INCOME ARISING OUT OF THE PAYMENT/S MADE IF ANY PART OR TH E WHOLE OF SUCH PAYMENT IS CONSIDERED TO BE A SUM CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT. IT IS HUMBLY SUBMITTED IN THE LIGHT OF THE ABOVE SUBMISSIONS THAT THE ABOVE MENTIONED TRANSACTIONS DO NOT, THEREFORE COME UNDER THE PURVIEW OF ANY WITHHOLDING TAX/TDS PER SECTION 195, AND NO DEFAULT U/S 201 SHOULD NORMALLY ARISE .' 4 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. 2.1. THE ABOVE EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. FOR THE FOLLOWING REAS ONS GIVEN IN PARAGRAPH NO.3.1.4 OF HIS ORDERS PASSED UN DER SECTION 201(1). 3.1.4. AS CAN BE SEEN, WHAT HAS BEEN ACQUIRED BY THE ASSESSEE IS THE USER LICENSES IN RESPECT OF THE COMPUTER PROGRAMMES/SOFTWARES AND FOR THE SAME ASSESSEE HAD ACQUIRED THE RIGHT TO SELL OR DISTRIBU TE TO THE CUSTOMERS IN INDIA. AS THE RIGHT TO SELL OR DISTRIBUTE OR USE OF ANY COPY OF THE COMPUTER PROGR AM IS AN EXCLUSIVE RIGHT OF THE COPYRIGHT OWNER (IN TH IS CASE DATA DESIGN AND/OR ITS LICENSORS), THE ACT OF SELLING/DISTRIBUTING/USING THE COPY OF THE COMPUTER PROGRAMME OR THE USER LICENCES THEREOF WITHOUT BEIN G AUTHORIZED TO DO SO WOULD INFRINGE THE COPYRIGHT. B UT IN THE PRESENT CASE, MOLD-TEK WAS AUTHORIZED BY DATA DESIGN TO DO AN ACT PROTECTED UNDER THE COPYRIGHT AND THE CONSIDERATION FOR THE RIGHT TO SELL/DISTRIBUTE/USE WAS PAID BY MOLD-TEK TO DATA DESIGN ON THE BASIS OF THE NUMBER OF COPIES OF THE COMPUTER SOFTWARE/PROGRAM OR NUMBER OF SUCH LICENSES OR THE DURATION OF SUCH LICENSES. THE HON' BLE ITAT, HYDERABAD IN THE CASE OF FRONTLINE SOFT LTD V S. DCIT(ITA NO.1080&10811HYD/03) (2008-TIOL-422- ITAT-HYD) HAS HELD THAT THE ASSESSEE ACQUIRED THE RIGHT TO USE 'TRUE DIAL SOFTWARE' AND PAYMENT MADE IN THIS REGARD WAS NOT FOR TRANSFER OF ABSOLUTE ASSIGNMENT AND OWNERSHIP OF 'TRUE DIAL SOFTWARE'. THE HON'BLE ITAT HELD THE PAYMENT FALLS UNDER THE DEFINITION OF 'ROYALTY' AND PAYMENT TO NON-RESIDENT IS DEEMED TO ACCRUE AND ARISE IN INDIA AND LIABLE FOR TDS. IN ONE OF THE RECENT RULINGS BY THE AUTHORITY FOR ADVANCE RULINGS (AAR) IN THE CASE OF AIRPORTS AUTHORITY OF INDIA (2008-TIOL-IO-ARA-IT) IT WAS HEL D THAT CONSIDERATION PAID BY AN INDIAN COMPANY FOR TH E USE OF A COMPUTER PROGRAM AMOUNTS TO ROYALTY. MOREOVER, IN A VERY RECENT JUDGMENT BY THE HON'BLE SPECIAL BENCH OF THE ITAT, NEW DELHI IN THE CASE OF NEW SKIES SATELLITE NV & OTHERS 2009-(126)-TTJ- 5 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. 0001-TDELS], IT WAS HELD THAT THE TERM 'SECRET' APPEARING IN THE PHRASE 'SECRET FORMULA OR PROCESS' IN EXPLANATION 2 TO SECTION 9( 1 )(VI) AND IN THE RELE VANT ARTICLE OF DT AA WILL NOT QUALIFY THE WORD 'PROCESS '. IN VIEW OF THE ABOVE AND CONSIDERING THE ASSESSEE'S RIGHT TO DISTRIBUTE OR SELL THE COPY OF THE COMPUTE R PROGRAM TO THE CLIENTS IN INDIA, AN EXCLUSIVE RIGHT UNDER THE COPYRIGHT ACT, THE PAYMENT MADE BY MOLD- TEK ON THE BASIS OF NO, OF COPIES/LICENSES AND DURATION OF SUCH LICENSES TO DATA DESIGN IS NOTHING BUT PAYMENT FOR THE RIGHT TO USE THE COPYRIGHT AND AMOUNTS TO 'ROYALTIES'. 2.2. FOR THE REASONS GIVEN ABOVE AND RELYING, INTE R ALIA, ON THE DECISION OF HONBLE KARNATAKA HIGH COU RT IN THE CASE OF SAMSUNG ELECTRONICS COMPANY LIMITED DAT ED 24.09.2009, THE A.O. HELD THAT THE ASSESSEE COMPANY WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE AMOUNTS IN QUESTION PAID BY THE ASSESSEE COMPANY TO M/S. TEKLA AND M/S. DDC AS CONSIDERATION FOR THE RIGHT TO USE THE COPY OF THE COMPUTER PROGRAMME BEING IN THE NATURE OF ROYAL TY AND SINCE THERE WAS FAILURE ON THE PART OF THE ASSE SSEE TO DEDUCT SUCH TAX, HE TREATED IT AS ASSESSEE IN DEFAU LT UNDER SECTION 201(1) AND ALSO CHARGED INTEREST UNDE R SECTION 201(1A) AS UNDER: A.Y. SEC.201(1) SEC.201(1A) PAYEE 2007 - 08 224,615 87,642 DESIGN DATA CORPN. USA 2008 - 09 769,485 241,403 2009 - 10 706,687 120,389 2010 - 11 403,024 27,637 2007 - 08 289,451 115,005 TEKLA CORPN LTD., FINLAND 2008 - 09 536,544 161,549 6 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. 3. AGGRIEVED BY THE ORDERS PASSED BY THE A.O. UNDER SECTION 201(1) AND 201(1A) OF THE ACT, APPEAL S WERE PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) FOR ALL THE FOUR YEARS UNDER CONSIDERATION. DURING THE COURSE O F APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE FO LLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE COMPANY IN SUPPORT OF ITS CASE THAT THE PAYMENTS IN QUESTION HAVING BEEN MADE FOR THE PURCHASE OF STAND ARD SOFTWARE, WHICH DID NOT CONTAIN ANY ELEMENT OF PROPRIETARY KNOWLEDGE, THEY WERE NOT IN THE NATURE OF ROYALTY AND THEREFORE, TAX AT SOURCE WAS NOT REQUIR ED TO BE DEDUCTED FROM THE SAID PAYMENTS. IN THIS REGARD IT IS RESPECTFULLY SUBMITTED AS UND ER: 1. MOLDTEK IMPORTED THE TEKLA SOFTWARE FROM TEKLA CORPORATION. FINLAND AND THE SDS/2 SOFTWARE FROM DESIGN DATA CORPORATION, USA RESPECTIVELY. THE SOFTWARE CD FROM FINLAND WAS IMPORTED BY THE PAYMENT OF CUSTOMS DUTY FOR WHICH SUITABLE PAYMENTS WERE MADE AND A BILL OF ENTRY MADE BY THE CUSTOMS AUTHORITIES ON IMPORT TO INDIA. IN THE CASE OF DESIGN DATA CORPORATION. SOFTWARE CD'S WERE AIR FREIGHTED TO INDIA ALONG WITH NECESSARY HARDWARE DONGLES. WHICH WERE ROUTED THROUGH CUSTOMS AND NO IMPORT DUTIES WERE PAID DUE TO LOW VALUE OF THE CD'S IMPORTED. THE SAID CONFIRMATIONS FOR THE AIR FREIGHTING FROM DESIGN DATA AND THE CUSTOMS BILL OF ENTRIES ETC IN THE CASE OF TEKLA CORPORATION WERE SUBMITTED TO THE ADDL DIRECTOR OF INCOME TAX ( INTERNATIONAL TAX), ALONG WITH XEROX COPIES OF THE CD'S IN WHICH THE SOFTWARE ARRIVED. 7 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF KPO, WHEREIN IT PROVIDES SERVICES OF STEEL DETAILING AND OTHER MECHANICAL DIAGRAMS FOR THE USE OF ITS CLIENTS ABROAD THROUGH THE STPI SCHEME. THE ASSESSEE HAS PRACTICALLY ENTIRELY EXPORT BUSINESS ONLY, AND THE SAID SOFTWARES ARE UTILIZED FOR THE PURPOSE OF EARNING FOREIGN CURRENCY REVENUE FROM ITS EXPORTS. THE ASSESSEE IS RECIPIENT OF SECTION 10B EXEMPTIONS IN RESPECT OF ITS INCOMES GENERATED. IT HAS NEGLIGIBLE OR NIL INCOMES IN RESPECT OF ITS DOMESTIC BUSINESS, IF ANY. 3. THE ASSESSEE MERELY PURCHASED A SOFTWARE SDS/2 FROM DESIGN DATA AND TEKLA STRUCTURES SOFTWARE, WHICH RESPECTIVE INSTALLATION CD'S WERE IMPORTED BY IT BY PAYMENT OF CUSTOMS DUTIES AND OTHER IMPORT LEVIES AS APPLICABLE. THE SAID SOFTWARES WERE PURCHASED FOR ITS USE IN ITS EXPORT BUSINESS AND NOT FOR REPRODUCTION. RESALE, RENTAL OR ANY OTHER SUCH USE. THE SAID CD'S ARE INSTALLATION CD'S AND ACCOMPANIED BY A HARDWARE LOCK WHICH ALLOWS IT TO BE USED BY A SINGLE USER, I.E., IT CAN BE INSTALLED ON ONLY ONE COMPUTER. THE HARDWARE LOCK PROVIDED ENSURES THIS AND ACCESS TO THE SAID SOFTWARE IS PREVENTED IF NOT ACCOMPANIED BY THE HARDWARE LOCK FOR EACH INSTALLATION. THIS LOCK IS AN ANTI PIRACY DEVICE. AS A RESULT ONLY ONE COMPUTER CAN BE LOADED WITH AND ACCESS THE SOFTWARE INSTALLED BY WAY OF THE CD PURCHASED BY THE COMPANY. IF THE ASSESSEE WANTS AN ADDITIONAL INSTALLATION OF THE SAID SOFTWARE ON ANOTHER COMPUTER. IT HAS TO REMIT THE FEES FOR THE INSTALLATION SEPARATELY AND THE SUPPLIERS WILL PROVIDE ADDITIONAL HARDWARE LOCKS. BEING ANTI PIRACY DEVICES. THE ASSESSEE HAS THEN TO INSTALL THE SOFTWARE. WHICH IT ALREADY HAS ON A CD FORMAT AND OWNS, AND ACTIVATE THE SAME BY MEANS OF A HARDWARE LOCK. IN CASE THE COMPUTER CRASHES OR IS 8 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. RENDERED DYSFUNCTIONAL, THE ASSESSEE CAN RELOAD THE INSTALLATION FROM THE CD AND ACTIVATE THE SAME WITH THE HARDWARE LOCK PROVIDED TO THEM PREVIOUSLY. 4. IT MAY BE SUBMITTED THAT THE ASSESSEE MERELY PURCHASED GOODS FROM FOREIGN SUPPLIERS AND OBTAINED THE SAME ON A COMPUTER MEDIA, AND BECAME THE OWNER OF THE SAME. IT HAS THE FREEDOM TO INSTALL THE SAID SOFTWARE/S ON ITS MACHINES FOR ITS OWN USE ON PAYMENT OF THE RELEVANT COST FOR EACH SUCH INSTALLATION. FOR WHICH IT HAS PERPETUAL USAGE RIGHTS. IT HAS NO RIGHTS TO REPRODUCE OR SELL OR RENT OUT OR DO ANY OTHER FORM OF BUSINESS WITH THE SAME. 5. THE ASSESSEE THEREFORE PURCHASED A COPYRIGHTED ARTICLE FOR ITS OWN USE IN ITS EXPORT BUSINESS AND DID NOT ACQUIRE ANY OTHER RIGHTS ON THE SAME. NOR WERE ANY OTHER RIGHTS AVAILABLE TO THE ASSESSEE AS A PURCHASER OF THE COPYRIGHTED ARTICLE. IT COULD ONLY USE THE SAME AS A USER WHICH IT DID FOR ITS EXPORT BUSINESS. THE ASSESSEE AS A PURCHASER DID NOT ACQUIRE THE RIGHTS TO REPRODUCE, SELL, OR OTHERWISE DISTRIBUTE THE SAID PURCHASE, AND IT IS HUMBLY SUBMITTED THAT THE ORDER OF THE HONOURABLE DDIT DATED 26.2.2010 IS NOT BASED ON FACTS AND IS ERRONEOUS TO THIS EXTENT. 6. THE ASSESSEE DID NOT ACQUIRE THE SOURCE CODE OF THE SAID SOFTWARE/S, AND COULD ONLY USE THE SAME AS A USER IN ITS OWN EXPORT BUSINESS, AND CONTRARY TO THE FINDINGS OF THE ASSESSING OFFICER, DID NOT ACQUIRE ANY RIGHTS TO REPRODUCE OR SELL OR DISTRIBUTE THE SAME OR OTHERWISE MODIFY OR COPY OR AMEND THE SAME IN ANY MANNER. IT IS PRECLUDED FROM THESE ACTIVITIES BY THE NATURE OF THE SINGLE USER/COMPUTER INSTALLATION PER USER. 7. IT THEREFORE IS SUBMITTED THAT THE PAYMENTS WERE FOR A COPYRIGHTED ARTICLE AND NOT IN THE 9 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. NATURE OF ROYALTIES OR TECHNICAL KNOW HOW, AND NO COPYRIGHTS OR OTHER RIGHTS HAVE BEEN TRANSMITTED TO THE ASSESSEE. 8. TO BUTTRESS ITS ACTION, THE ASSESSEE ALSO OBTAINED SUITABLE CERTIFICATES FROM AN ACCOUNTANT/COUNSEL IN THE PRESCRIBED FORMS PRIOR TO MAKING ANY REMITTANCE AGAINST THE SAID PURCHASES. 9. IT IS SUBMITTED ONCE AGAIN THAT THE ENTIRE BUSINESS OF THE ASSESSEE IS THAT OF EXPORT IN THE FORM OF A KPO BUSINESS MODEL, AND IT IS ENGAGED IN THIS BUSINESS AS AN STPI REGISTERED ORGANIZATION. SECTION 9(1 )(VI), WHICH SPECIFIES INCOME DEEMED TO ACCRUE OR ARISE IN INDIA IS REPRODUCED BELOW FOR READY REFERENCE: 'INCOME BY WAY OF ROYALTY PAYABLE BY (SUB SECTION) (B): A PERSON WHO IS A RESIDENT. EXCEPT WHERE ROYALTY IS PAYABLE IN RESPECT OF ANY RIGHT PROPERTY OR INFORMATION USED OR SERVICES UTILIZED FOR THE PURPOSES OF BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA.' 3.1. THE LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE COMPANY. ACCORDING TO HIM, THERE WAS A BASIC DISTINCTION BET WEEN ROYALTIES AND CONSIDERATION OF SALE PAID TO A NON-R ESIDENT. IN THIS REGARD, HE REFERRED TO THE DEFINITION OF TH E TERM ROYALTY AS GIVEN IN EXPLANATION (2) TO SECTION 9( 1)(VI) OF THE ACT AS WELL AS IN THE RELEVANT CLAUSE OF THE TR EATY TO DISCUSS THE NATURE OF PAYMENTS THAT COME WITHIN THE AMBIT OF THE SAID DEFINITION. HE ALSO RELIED INTER ALIA, ON THE DECISION OF AUTHORITY FOR ADVANCED RULINGS IN T HE CASE 10 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. OF DEL INTERNATIONAL SERVICES (INDIA) P. LTD., 305 ITR 37 (AAR). HE FINALLY REFERRED TO THE DEFINITION OF CO PY RIGHT GIVEN IN SECTION 14 OF THE COPY RIGHT ACT AND OBSER VED THAT THE RIGHTS IN COMPUTER PROGRAMMES WERE IN THE FORM OF INTELLECTUAL PROPERTY. HE HELD THAT WHAT IS TAXE D AS A ROYALTY IS THE AMOUNT PAID AS CONSIDERATION FOR THE USE OR THE RIGHT TO USE AND NOT OUTRIGHT PURCHASE OF THE R IGHT TO USE AS AN ASSET. HE HELD THAT THE PAYMENTS MADE BY THE ASSESSEE COMPANY TO M/S. TEKLA AND M/S. DDC FOR PURCHASE OF SOFTWARE THUS WERE IN THE NATURE OF ROY ALTY FROM WHICH TAX AT SOURCE WAS LIABLE TO BE DEDUCTED. ACCORDINGLY, THE ORDERS PASSED BY THE A.O. UNDER SE CTION 201(1) AND 201(1A) FOR ALL THE FOUR YEARS UNDER CONSIDERATION WERE UPHELD BY THE LD. CIT(A). AGGRIE VED BY THE ORDERS OF THE LD. CIT(A), THE ASSESSEE HAS PREF ERRED THESE APPEALS BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. ALTHOUGH, THE LEARNED REPRESENTATIVES OF BOTH THE S IDES HAVE CITED VARIOUS CASE LAWS IN SUPPORT OF THEIR RE SPECTIVE STAND ON THE ISSUE UNDER CONSIDERATION, IT IS OBSER VED THAT THE MAIN CONTENTION AS RAISED ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS BE FORE ME IS THAT AS PER THE RELEVANT LICENSE AGREEMENTS, THE RE WAS NO TRANSFER OF ANY RIGHTS IN RESPECT OF COPY RIGHT AND IT WAS THE CASE WHERE THERE WAS MERELY A TRANSFER OF T HE COPY RIGHTED ARTICLE. THE CRUX OF THE ISSUE THUS IS WHETHER THE AMOUNT IN QUESTION PAID BY THE ASSESSEE TO M/S. 11 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. TEKLA AND M/S. DDC UNDER THE RELEVANT LICENSE AGREEMENTS WAS FOR A COPY RIGHT OR A COPY RIGHTED A RTICLE AND THIS DISTINCTION IS MATERIAL BECAUSE AS HELD IN THE VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE LD. CO UNSEL FOR THE ASSESSEE, IF IT IS FOR A COPY RIGHT, THE SA ME SHOULD BE CLASSIFIED AS ROYALTY BOTH UNDER THE INCOME TA X ACT AND UNDER THE DTAA. ON THE OTHER HAND, IF THE PAYME NT IS ACTUALLY FOR A COPY RIGHTED ARTICLE, THEN IT ONLY R EPRESENTS THE PURCHASE PRICE OF THE ARTICLE AND THE SAME CANN OT BE CONSIDERED AS ROYALTY. IT IS, THEREFORE, RELEVANT TO ASCERTAIN AS TO WHETHER THERE WAS TRANSFER OF ANY R IGHTS INCLUDING THE GRANTING OF A LICENSE IN RESPECT OF C OPY RIGHT TO THE ASSESSEE IN THE PRESENT CASE UNDER THE LICEN SE AGREEMENTS AND THIS EXERCISE IS REQUIRED TO BE DONE BY EXAMINING AND ANALYSING THE TERMS AND CONDITIONS OF THE RELEVANT LICENSE AGREEMENTS ENTERED INTO BY THE ASS ESSEE COMPANY WITH M/S. TEKLA AND M/S. DDC. A PERUSAL OF THE IMPUGNED ORDERS PASSED BY THE LD. CIT(A), HOWEVER, SHOWS THAT ALTHOUGH HE HAS PASSED A VERY DETAILED O RDER, HE HAS NEITHER CONSIDERED NOR ANALYSED THE TERMS AN D CONDITIONS OF THE RELEVANT LICENSE AGREEMENTS SO AS TO ASCERTAIN THE EXACT NATURE OF RIGHTS ACQUIRED BY TH E ASSESSEE WHICH IS SO VITAL AND MATERIAL TO DECIDE T HE ISSUE UNDER CONSIDERATION. MOREOVER, AS POINTED OUT BY TH E LEARNED D.R., THE SCOPE OF THE DEFINITION ROYALTY AS GIVEN IN EXPLANATION (2) TO SECTION 9(1)(VI) HAS BEEN FUR THER CLARIFIED BY INSERTING EXPLANATION (IV) AND EXPLANA TION (V) BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 12 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. 01.06.1976 AND THE BENEFIT OF THIS AMENDMENT MADE SUBSEQUENTLY WITH RETROSPECTIVE EFFECT WAS NOT AVAI LABLE TO THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDERS. A S CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE IN TH IS REGARD, IT IS ALSO RELEVANT TO SEE WHETHER THERE IS ANY AMENDMENT IN THE RELEVANT ARTICLES OF THE DTAAS WID ENING THE SCOPE OF THE TERM ROYALTY AS DONE IN THE DOME STIC LAW. KEEPING IN VIEW ALL THESE RELEVANT ASPECTS OF THE MATTER WHICH HAVE A DIRECT BEARING ON THE ISSUE UND ER CONSIDERATION, I CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO REMIT THE MATTER BACK TO THE LD. CIT(A) FOR DECIDING THE SAME AFRESH ON MERIT IN ACCORDANCE WITH LAW, AFTER GIVING THE ASSESSEE PROP ER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. 5. IN THE RESULT, ALL THE SIX APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PUR POSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.2015. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED 29 TH JULY, 2015. VBP/- 13 ITA.NO.406 TO 411/HYD/2012 M/S. MOLDTEK TECHNOLOGIES LTD., HYDERABAD. COPY TO 1. M/S. MOLDTEK TECHNOLOGIES LIMITED, HYDERABAD. C/O. PRATURI & SRIRAM, FLAT NO.202, SAPTAGIRI RESIDENCY, 1-10-98/A, CHIKOTI GARDENS, BEGUMPET, HYDERABAD 500 016. 2. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-I, I.T. TOWERS, HYDERABAD. 3. CIT(A) - V , HYDERABAD. 4. THE DIT (INTERNATIONAL TAXATION), HYDERABAD. 5. D.R. ITAT A (SMC) BENCH, HYDERABAD. 6. GUARD FILE