Qualcomm Technologies Inc., Hyderabad V. DCIT, Circle- 3(1)(1), International Taxation , New Delhi

ITA 7230/DEL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0308 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 04-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Business income; Double taxation relief; Permanent establishment; Initiation of penalty proceedings; Wholly owned subsidiary; TDS
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER AND SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO.7230/DEL/2017 ASSESSMENT YEAR: 2013-14 QUALCOMM TECHNOLOGIES INC., S. R. BATLIBOI & CO. OVAL OFFICE, 18, ILABS CENTRE HITECH CITY, MADHAPUR, HYDERABAD PAN NO. AAACQ3149D VS DCIT CIRCLE 3 (1) (1), INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NISHANT THAKKAR, ADVOCATE MS. JASMIN AMALSADWALA, ADVOCATE RESPONDENT BY SHRI SURENDER PAL, SR. DR DATE OF HEARING: 27/05/2019 DATE OF PRONOUNCEMENT: 01/07/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21.09.2017 OF THE CIT(A)-23, NEW DELHI RELATING TO A. Y. 2013-14. 2. GROUNDS RAISED BY THE ASSESSEE ARE UNDER :- PAGE | 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 23, DELHI :- GROUND NO. 1 - REVENUE RECEIVED BY THE APPELLANT UN DER THE BREW AGREEMENTS IS TO WARDS SALE OF A COPYRIGHTED ARTICLE AND NOT FOR RIGHT TO USE COPYRIGHT ERRED IN UPHOLDING THE APPLICATION OF PROVISIONS OF SECTION 9(L)(VI)(B) OF THE INCOME- TAX ACT, 1961 (THE 'ACT') AND ARTICLE 12 OF INDIA-U S TAX TREATY ('TAX TREATY') FOR TAXING THE INCOME OF THE APPELLANT EARNED TOWARDS SALE OF COPYRIGHTED A RTICLE I.E. BREW OPERATORS IN INDIA. 2. ERRED IN PRINCIPLE IN HOLDING THAT THE SALE OF A CO PYRIGHTED ARTICLE SHALL BE GOVERNED BY THE SALE OF GOODS ACT, 1930 AND THE INDIAN CUSTOMS ACT IN CASE OF IMPORT OF AN ARTICLE AND CONSIDERING THE TRANSACTION UNDER BREW OPERATOR AGREEMENT IS NOT SUBJECT TO INDIAN CUSTOMS ACT, THE SALE OF BREW SOFTWARE IS NOT A COPYRIGHTED ARTICLE. 3. ERRED IN COMPARING THE TRANSACTION OF SALE OF BREW SOFTWARE BY QTI WITH GRANT OF RIGHT BY AN AUTHOR TO A PUBLISHER FOR PRINTING AND MAKING OF COPIES, WITHOUT APPRECIATING THE FACT THAT THERE IS NO GRANT OF RIG HT TO USE COPYRIGHT BY QTI TO THE TELECOM OPERATORS. WHEREAS IN THE CASE OF A PUBLISH ER, THE RIGHT TO USE COPYRIGHT IS GRANTED BY THE AUTHOR FOR PRINTING AND MAKING COPIE S IN EXCHANGE OF ROYALTY. 4. GROSSLY ERRED IN CONCLUDING THAT QTI GRANTS A RIGHT TO USE COPYRIGHT TO THE TELECOM OPERATORS UNDER THE BREW OPERATOR AGREEMENT AND BY DISREGARDING THE FACT THAT THE TELECOM OPERATORS ARE NOT PERMITTED TO MAKE COPIES UNDER THE BREW AGREEMENT EXCEPT FOR THE PURPOSES OF BACK-UP AND ARCHIVAL. 5. ERRED IN NOT FOLLOWING THE PRINCIPLES OF JUDICIAL D ISCIPLINE AND DISREGARDING THE JUDGEMENT OF THE JURISDICTIONAL HON'BLE ITAT IN THE CASE OF QUALCOMM INCORPORATED ON SIMILAR FACTS. 6. ERRED IN IRRELEVANTLY PRESUMING THAT THE APPELLANT HAS CONCEDED TO THE TAXABILITY PAGE | 3 UNDER THE ACT MERELY BECAUSE THE APPELLANT HAS SOUG HT TO RELY ON THE BENEFICIAL SCOPE OF PROVISIONS UNDER THE TREATY. GROUND NO.2 ERRONEOUS LEVY OF INTEREST UNDER SECTIO N 234 C OF THE ACT 7. ERRED IN HOLDING THAT APPELLANT IS LIABLE TO INTERE ST UNDER SECTION 234C OF THE ACT ON THE ASSESSED INCOME WHEREAS THE INTEREST IS CALCULATED ON RETURNED INCOME. GROUND NO.3 ERRONEOUS INITIATION OF PENALTY UNDER S ECTION 271 (1) ( C) OF THE ACT. 8. ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY INCORPORATED IN UNITED STATES OF AMERICA AN D IS A WHOLLY OWNED SUBSIDIARY OF QUALCOMM INCORPORATED USA(QUALCOMM). QTI IS ENGAGED IN THE BUSINESS OF DE SIGN, DEVELOPMENT AND MARKETING OF DIGITAL WIRELESS TELECOMMUNICATIONS PRODUCTS AND SERVICES BASED ON C ODE DIVISION MULTIPLE ACCESS (CDMA), ORTHOGONAL FREQUEN CY DIVISION MULTIPLE ACCESS(OFDMA) AND OTHER TECHNOLOGIES. DUR ING THE YEAR, QTI HAS PROVIDED SERVICES TO M/S. SOHAMSAA SY STEMS PVT. LTD. (SOHAMSAA), SISTEMA SHYAM TELE SERVICES LTD. ( SISTEMA), TATA TELE SERVICES LTD (TTSL), VIRGIN MOBILE INDIA LTD. (VIRGIN MOBILE) AND ALCATEL LUCENT INDIA LTD. (ALCATEL). 3.1 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.0 9.2013 DECLARING NIL INCOME. HOWEVER, THE ASSESSEE COMPAN Y OFFERED AN PAGE | 4 INCOME OF RS.44,46,767/- AS ROYALTY TAXABLE AT SPEC IAL RATE OF 10% AS PER IT ACT 1961. THE ASSESSEE COMPANY HAS R EVISED ITS RETURN OF INCOME ON 31.03.2015 AT THE SAME INCOME B UT THE CLAIM OF TDS WAS RAISED FROM RS.17,36,237/- TO RS.19,41,8 97/-. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DATED 12.2.2016 EXPLAINED AS UNDER :- EFFECTIVE AS OF OCTOBER 1, 2012 QUALCOMM INCORPORATED COMPLETED AN INTERNAL CORPORATE REORGANIZATION, AND IN CONNECTION WITH THE INTERNAL CORPORATE REORGANIZATION QUALCOMM TRANSFERRED THE ASSETS RELATING TO CERTAIN OF ITS BUSINESSES TO ITS WHOLLY- OWNED SUBSIDIARY QUALCOMM TECHNOLOGIES, INC . THE QUALCOMM INTERNET SERVICES'(QIS) DIVISION IS NOW PA RT OF QTI. AS A PART OF THIS TRANSFER, QIS SENT NOTICE OF ASSIGNMENT LETTERS TO ITS BREW CUSTOMERS, INCLUDING SISTEMA SHYAM TELESERVICES LIMITED AND TATA TELE SERVICES LIMITED. AS A RESULT OF THIS ASSIGNMENT, WE CONFIRM, FOR THE PERIOD OF OCTOBER 01, 2012 TO MARC H 31, 2013 (THE APPLICABLE PART FOR A.Y 2013-14) THAT: THE BREW AGREEMENT IS BEING OPERATED WITH THE TELECOM OPERATORS (E.G, SISTEMA SHYAM TELESERVICES LIMITED AND TATA TELESERVICES LIMITED) UNDER THE SAME TERMS AND CONDITIONS AS WERE EXISTENT WITH QUALCOMM. AIL RISKS, REWARDS, RIGHTS AND OBLIGATION UNDER T HE BREW AGREEMENTS ARE VESTED WITH QTI ON THE SAME PAGE | 5 TERMS AND CONDITIONS AS WERE EXISTENT WITH QUALCOMM. 4. THE ASSESSEE COMPANY FURTHER EXPLAINED THAT IT DOES NOT CONSTITUTE THE PERMANENT ESTABLISHMENT (PE) AS PER ARTICLE 5(1) AND 5(2) OF THE TAX TREATY BETWEEN IND IA AND USA. 5. FUNCTIONS OF THE ASSESSEE (QTI): I. QTI GRANTS LICENSES TO MANUFACTURERS OF WIRELESS PRODUCTS FOR THE RIGHT TO USE PORTIONS OF QTSS INTELLECTUAL PROPERTY PORTFOLIO, WHICH INCLUDES CERTAIN SOFTWARE RIGHTS ESSENTIAL TO AND/OR USEFUL IN THE MANUFACTURE AND SALE OF CERTAIN WIRELESS PRODUCTS. II. THE ASSESSEE SUBMITTED THAT RS. 44,46,767/- IS RECEIVED FROM SOHAMSAA UNDER AMSS AND QRDA AGREEMENTS. IF IS SUBMITTED THAT THE CONSIDERATION IS FOR USE OF OR RIGHT TO USE, ALTER, MODIFY, COPY, TRANSLATE OR ADOPT THE SOURCE CODE OF AMSS AND QRDA SOFTWARE. THE ASSESSEE AGREES THAT THIS AMOUNT IS TAXABLE @ 10% UNDER THE PROVISION OF IT ACT, 1961. QTI PROVIDES TECHNOLOGY TO SUPPORT AND ACCELERATE THE CONVERGENCE OF THE WIRELESS DATA MARKET, INCLUDING IN IT BREW, QCHAT AND QPOINT PRODUCTS AND SERVICES; 6. REVENUE STREAMS OF THE ASSESSEE AND REVENUE DETAILS PAGE | 6 4. THE ASSESSEE GAVE THE FOLLOWING DETAILS OF TAXABLE AND NON TAXABLE INCOME RELEVANT TO AY 2013-14. S.NO CUSTOMER NATURE OF SERVICES AMOUNT RECEIVED 01 SOHAMSAA SYSTEMS PRIVATE LIMITED ROYALTY 44,46,767 02 ALCATEL LUCENT INDIA LTD. TEST TOOLS 2,64,300 03 SISTEMA SHYAFRT TELESERVICES LTD. TEST TOOLS 12,43,575 04 SISTEMA SHYAM TELESERVICES LTD LICENSE OF BREW SOFTWARE 74,47,372 05 TATA TELESERVICES LIMITED LICENSE OF BREW SOFTWARE 46,31,570 06 VIRGIN MOBILE INDIA PVT. LTD BREW LICENSE OF BREW SOFTWARE 4,62,404 *THE ASSESSEE HAS ONLY OFFERED THE INCOME MENTIONED IN SI. NO 1 TO TAX IN INDIA AS ROYALTY. 6.1 HOWEVER, THE ASSESSEE SUBMITTED THAT THE PAYMENTS AT SI. NO 2 TO 6 ARE NOT TAXABLE IN INDIA. THE ASSESSEE SUBMITTED THAT THE -PAYMENTS MADE BY TATA, SISTEMA SHYAM AND VIRGIN MOBILES ARE NOT TAXABLE IN INDIA. FURTHER, IT WAS EXPLAINED THAT THE AMOUNT RECEIVED FROM ALCATEL AND SISTEMA SHYAM ON ACCOUNT OF TEST TOOLS ARE ALSO NOT TAXABLE IN INDIA. ACCORDING TO THE ASSESSEE, BASED ON THE NATURE OF SERVICES RENDERED BY ASSESSEE TO TATA, SISTEMA AND VIRGIN MOBILES AND TH E PROVISIONS OF ARTICLE 12 OF INDO-US DTAA, THE REVEN UES RECEIVED BY ASSESSEE UNDER THE BREW AGREEMENTS ARE NOT IN THE NATURE OF 'ROYALTY/FEES FOR INCLUDED SER VICES'. THEREFORE, THE REVENUE RECEIVED FROM TATA AND SISTE MA UNDER BREW OPERATOR AGREEMENT ('BOA') AND BREW CARRIER AGREEMENT IS NOT LIABLE TO TAX IN INDIA. FUR THER, PAGE | 7 THE ASSESSEE SUBMITTED THAT REVENUE RECEIVED FROM SISTEMA SHYAM REPRESENTS AMOUNT PAID TOWARDS BREW SELECT ALLIANCE MEMBERSHIP FEES AND SUCH PAYMENT DOES NOT FALL UNDER THE DEFINITION OF ROYA LTY OR FEES FOR INCLUDED SERVICES UNDER THE PURVIEW OF AR TICLE 12 OF THE INDIA-USA DOUBLE TAXATION AVOIDANCE AGREEMENT (TREATY) AND HENCE THE SAME IS NOT LIAB LE TO TAX IN INDIA 5. THE ASSESSING OFFICER DURING THE COURSE OF ASSES SMENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN AS : A) WHY THE REVENUE RECEIVED FROM SISTEMA SHYAM (SISTE MA SHYAM) SHOULD NOT BE TAXED IN INDIA? B) WHY THE REVENUE RECEIVED FROM M/S TATA TELESERVICES LIMITED (TATA) UNDER THE BREW OPERATOR AGREEMENT (BREW AGREEMENT) SHOULD NOT BE TAXED IN INDIA? C) WHY THE REVENUE RECEIVED FROM VIRGIN MOBILES INDIA PVT. LTD. (VIRGIN MOBILE) UNDER THE BREW LICENSE OF BREW SOFTWARE (BREW AGREEMENT) SHOULD NOT BE TAXED IN INDIA. D) WHY THE ASSESSMENT MAY NOT BE COMPLETED ON THE BASIS OF ASSESSMENT FOR A Y 2012-13 IN CASE OF QUALCOMM INCORPORATED AS THE ASSESSEE COMPANY IS PAGE | 8 PROVIDING THE SERVICES ON THE BASIS OF SAME AGREEME NT AFTER REORGANIZATION OF THE GROUP. 6. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE A SSESSEE THE ASSESSING OFFICER HELD THAT THE INCOME OF THE ASSES SEE FROM LICENSING OF BREW SOFTWARE TO TATA TELESERVICES, SI STEMS SHYAM AND VIRGIN MOBILE INDIA PVT. LTD. IS TAXABLE UNDER SECTION 9 (1) (VI) OF THE I. T. ACT AND UNDER ARTICLE 12 OF INDO US- DTAA. THE ASSESSING OFFICER ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.1,84,95,988/-. 7. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER HOLDING THAT THE PAYMENT UNDER CONSIDERATIO N RECEIVED BY THE ASSESSEE PURSUANT TO THE BREW AGREEMENTS IS VER Y MUCH TAXABLE NOT ONLY U/S 9(1)(VI) OF THE IT ACT BUT ALS O UNDER ARTICLE 12 OF THE INDO-USA DTAA. SO FAR AS THE PAYMENT RECEIV ED IN CONNECTION WITH TEST TOOLS AGREEMENT IS CONCERNED, HE ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER IN HOLDI NG THAT THE TEST TOOLS AGREEMENT FORMED PART OF THE BREW AGREEMENT A ND THE NATURE OF TRANSACTION UNDER TEST TOOLS AGREEMENT IS AKIN TO THE MAIN TRANSACTION REGARDING SUPPLY OF BREW SYSTEM. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. PAGE | 9 9. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET D ID NOT PRESS GROUND OF APPEAL NO.2 FOR WHICH THE LD. DR HAS NO O BJECTION. ACCORDINGLY THE GROUND NO.2 IS DISMISSED AS NOT PRE SSED. 10. GROUND NO.3 OF APPEAL BEING PREMATURE AT THIS J UNCTURE IS NOT BEING ADJUDICATED AND IS DISMISSED. 11. SO FAR AS GROUND OF APPEAL NO.1 IS CONCERNED, W E FIND THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2014-15 W HILE ADJUDICATING IDENTICAL ISSUE HAS HELD THAT ROYALTY FROM BREW OPERATORS AGREEMENT IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE U/S. 9 (I) (VI) B OF THE IT ACT AS WELL AS ARTICLE 12 OF INDO- US-DTAA. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL FROM PARA-9 ONWARDS READ AS UNDER :- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON THE RECORD. WE FIND, THE ASSESSING OFFICER, IN THE INSTANT CASE, FOLLOWING H IS ORDER FOR THE EARLIER YEARS, BROUGHT ROYALTY FROM BREW OPERAT ORS AGREEMENT TO TAX IN THE HANDS OF THE ASSESSEE U/S 9 (1)(VI) OF THE ACT AS WELL AS ARTICLE 12 OF THE INDO-USA DTAA. THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. WE FIND THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FROM ASSESSMENT YEA R 2005-06 TO 2012-13. WE FIND THE TRIBUNAL, IN THE CONSOLIDA TED ORDER DATED 16 TH APRIL, 2018 FOR ASSESSMENT YEAR 2009-10 TO 2012-13 , VIDE PARA 46 OF THE ORDER, HAS DISCUSSED THE ISSUE AND HELD THAT PAGE | 10 THE ROYALTY FROM BREW OPERATORS AGREEMENT IS NOT CH ARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE U/S 9(1)(VI) OF THE ACT AS WELL AS ARTICLE 12 OF THE INDO-US DTAA. THE RELEVANT OB SERVATIONS OF THE TRIBUNAL FROM PARA 46 ONWARDS READ AS UNDER: - 46. NOW WE COME TO GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE WITH RESPECT TO REVENUE RECEIVED BY APPELLANT UNDER BREW OPERATOR AGREEMENT AND BREW CARRIER AGREEMENT WHAT IS TAXED AS ROYALTY INCOME IN INDIA U/S 9(1)(VI)(C) OF THE ACT AND ARTI CLE 12 OF THE INDIA- US TREATY. THIS ISSUE HAS BEEN DEALT WITH EXTENSIVE LY BY THE COORDINATE BENCH IN SECOND ORDER FOR ASSESSMENT YEA R 2005-6 TO 2008-09 DATED 20THFEBRUARY 2015 IN PARAGRAPH NO. 10 2 TO 108 AS UNDER:- 102.THAT TAKES US TO GROUND NO. 4, AS RAISED BY TH E ASSESSEE, AGAINST HOLDING THAT THE REVENUES RECEIVED BY THE A PPELLANT UNDER THE BREW OPERATOR AGREEMENT AND BREW CARRIER AGREEM ENT IS TAXABLE AS ROYALTY INCOME IN INDIA UNDER SECTION 9( 1)(VI) OF THE ACT AND ARTICLE 12 OF THE INDIA-USA TAX TREATY. THE ASS ESSEE CONTENDS THAT IN DOING SO, THE AO HAS FAILED TO APPRECIATE T HAT THE PROVISION OF BREW SOFTWARE TO TATA AND TATA TELESERVICES (MAHARA SHTRA) LIMITED AND RELIANCE COMMUNICATIONS INFRASTRUCTURE LIMITED RESULTS IN SALE OF 'COPYRIGHTED ARTICLE' AND NOT LICENSING OF A 'COPYRIGHT'. 103.SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, ONLY A FEW FACTS ARE REQUIRED TO BE TAKEN NOTE OF. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS INVOICED AN AMOUNT OF RS 2,52,70.569 T O TATA TELESERVICES LIMITED UNDER BREW (BINARY RUNTIME ENV IRONMENT FORWIRELESS) AGREEMENT. IT WAS NOTED THAT IT IS AN APPLICATION DEVELOPMENT PLATFORM, DEVELOPED BY QUALCOMM, FOR MO BILE PHONES THAT ENABLES USERS TO DOWNLOAD AND RUN APPLICATIONS FOR PLAYING GAMES, SENDING MESSAGES AND SHARING PHOTOS ETC. IT WAS ALSO NOTED THAT THIS PLATFORM RUNS BETWEEN THE APPLICATION AND WIRELESS DEVICE'S CHIP OPERATING SYSTEM SO THAT PROGRAMMERS CAN DEVEL OP APPLICATIONS FOR WIRELESS DEVICE WITHOUT THE CODE FOR SYSTEM INT ERFACE OR UNDERSTANDING OPERATING SYSTEMS. IT WAS ALSO NOTED THAT END USERS OF BREW CUSTOMERS ARE THE CARRIERS WHO PAY AN ENABLEME NT FEES BASED ON DEVICE SALES OR A REVENUE SHARE FOR APPLICATION SOFTWARE THAT ARE DOWNLOADED. ON THESE FACTS, THE ASSESSING OFFICER P ROCEEDED TO BRING THE SAME TO TAX BY OBSERVING AS FOLLOWS: PAGE | 11 I HAVE PERUSED THE SUBMISSIONS MADE BY THE ASSESSEE . HOWEVER, THIS HYPOTHESIS IS NOT CORRECT AS SOFTWARE IS LICENSED A ND NOT SOLD. FURTHERMORE AS PER THE TERMS OF THE BOA AS REPRODU CED ABOVE, THE ASSESSEE HAS GIVEN TATA TELESERVICES THE LICENSE TO REPRODUCE AND INSTALL THE COPYRIGHTED SOFTWARE. THE LICENSE FEE F OR THE RIGHT TO REPRODUCE AND USE THE BREW SOFTWARE CANNOT BE ANYTH ING ELSE BUT ROYALTY. THERE IS A DISTINCTION BETWEEN SALE AND LI CENSE SINCE IN A SALE NO AGREEMENT IS ENTERED INTO BETWEEN BUYER AND SELLER, HOWEVER IN CASE OF LICENSING OF SOFTWARE AN AGREEMENT IS EN TERED INTO BETWEEN COPYRIGHT HOLDER AND THE USER. GRANT OF LICENSE IS GRANTING THE USER A RIGHT TO US E THE SOFTWARE. THE ASSESSEE'S SUBMISSION THAT IN CASES WHERE RIGHTS AC QUIRED ARE LIMITED AND NECESSARY ONLY TO ENABLE THE USER TO OPERATE TH E PROGRAM AND ALLOW THE USER TO COPY THE PROGRAM ON THE USER'S CO MPUTER HARD DRIVE, PAYMENTS WOULD NOT BE TREATED AS TOWARDS ROY ALTY BUT AS TOWARDS BUSINESS INCOME IS NOT ACCEPTABLE. THE ASSE SSEE ITSELF AGREES THAT PAYMENT IS MADE FOR ONLY THE RIGHT TO U SE THE SOFTWARE AND NO OTHER TITLE OR INTEREST IN THE SOFTWARE IS T RANSFERRED TO THE PAYER. THERE IS NO TRANSFER OF OWNERSHIP RIGHTS. VA RIOUS DECISIONS OF THE SUPREME COURTS AND HIGH COURTS CLARIFY THAT SAL ES CONSTITUTES OUT AND OUT TRANSFER, WHEREAS IN LICENSE THERE IS O NLY RIGHT TO USE. SOME OF THESE DECISION ARE AT 69 ITR 692 (SC), 236 ITR 314 (ASC), 811 ITR 243, 671 ITR227. THUS THIS REASONING OF THE ASSESSEE HAS NO LEGAL OR FACTUAL BASIS. IN THIS CASE, THE USER ONLY HAS A RIGHT AND GETS A LICENSE TO USE THE SOFTWARE. EVEN IN THE OECD COMMENTARY IT IS MENTIONED THAT TH E CHARACTER OF PAYMENTS RECEIVED IN TRANSACTIONS INVOLVING THE TRA NSFER OF COMPUTER SOFTWARE DEPENDS UPON THE NATURE OF RIGHTS THAT THE TRANSFEREE ACQUIRES UNDER THE PARTICULAR ARRANGEMENT, REGARDIN G THE USE AND EXPLOITATION OF THE PROGRAM. THE RIGHTS IN COMPUTER PROGRAMME ARE IN THE FORM OF INTELLECTUAL PROPERTY. IT HAS FURTHE R MENTIONED 'PAYMENTS MADE FOR THE ACQUISITION OF PARTIAL RIGHT INTHE COPYRIGHT (WITHOUT THE TRANSFEROR FULLY ALIENATING THE COPYRI GHTS) WILL REPRESENT A ROYALTY, WHERE THE CONSIDERATION IS FOR GRANTING OF RIGHTS TO USE THE PROGRAM IN A MANNER, THAT WOULD WITHOUT SUCH LICENS ES CONSTITUTE THE INFRINGEMENT OF COPYRIGHTS.'UNDER THE LAWS OF T HE COUNTRY, IF THE SOFTWARE OWNED BY THE ASSESSEE IS USED WITHOUT LICE NSES, IT BECOMES INFRINGEMENT OF THE COPYRIGHT. THEREFORE ARGUMENTS OF THE ASSESSEE REGARDING APPLICABILITY OF OECD COMMENTARY FAIL ON THIS COUNT AS WELL. PAGE | 12 104.THE ASSESSEE DID RAISE A GRIEVANCE BEFORE THE D RP BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS I N APPEAL BEFORE US. 105.WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 106. WE FIND THAT THE PAYMENT IN QUESTION IS ADMITT EDLY THE PAYMENT IS FOR A SOFTWARE WHICH IS FOR A COPYRIGHTED ARTICL E AND NOT THE COPYRIGHT ITSELF. THERE IS NOTHING ON RECORD TO SUG GEST THAT THE PAYMENT IS FOR THE COPYRIGHT ITSELF. IN THIS VIEW O F THE MATTER, THE ISSUE IS CLEARLY COVERED, IN FAVOUR OF THE ASSESSEE , BY HON'BLE DELHI HIGH COURT'S JUDGMENT IN THE CASE OF DIT V.INFRASOF T LTD. [2014] 220 TAXMAN 273/[2013] 39 TAXMANN.COM 88WHEREIN THEIR LO RDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: '85. THE LICENSING AGREEMENT SHOWS THAT THE LICENSE IS NON- EXCLUSIVE, NON-TRANSFERABLE AND THE SOFTWARE HAS TO BE USES IN ACCORDANCE WITH THE AGREEMENT. ONLY ONE COPY OF THE SOFTWARE IS BEING SUPPLIED FOR EACH SITE. THE LICENSEE IS PERMI TTED TO MAKE ONLY ONE COPY OF THE SOFTWARE AND ASSOCIATED SUPPORT INF ORMATION AND THAT ALSO FOR BACKUP PURPOSES. IT IS ALSO STIPULATE D THAT THE COPY SO MADE SHALL INCLUDE INFRASOFT'S COPYRIGHT AND OTHER PROPRIETARY NOTICES. ALL COPIES OF THE SOFTWARE ARE THE EXCLUSI VE PROPERTY OF INFRASOFT. THE SOFTWARE INCLUDES A LICENCE AUTHORIS ATION DEVICE, WHICH RESTRICTS THE USE OF THE SOFTWARE. THE SOFTWA RE IS TO BE USED ONLY FOR LICENSEE'S OWNBUSINESS AS DEFINED WITHIN T HE INFRASOFT LICENCE SCHEDULE. WITHOUT THE CONSENT OF THE ASSESS EE THE SOFTWARE CANNOT BE LOANED, RENTED, SOLD, SUBLICENSED OR TRAN SFERRED TO ANY THIRD PARTY OR USED BY ANY PARENT, SUBSIDIARY OR AF FILIATED ENTITY OF LICENSEE ORUSED FOR THE OPERATION OF A SERVICE BURE AU OR FOR DATA PROCESSING. THE LICENSEE IS FURTHER RESTRICTED FROM MAKING COPIES, DECOMPILE, DISASSEMBLE OR REVERSE-ENGINEER THE SOFT WARE WITHOUT INFRASOFT'S WRITTEN CONSENT. THE SOFTWARE CONTAINS A MECHANISM WHICH INFRASOFT MAY ACTIVATE TO DENY THE LICENSEE U SE OF THE SOFTWARE IN THE EVENT THAT THE LICENSEE IS IN BREACH OF PAYM ENT TERMS OR ANY OTHER PROVISIONS OF THIS AGREEMENT. ALL COPYRIGHTS AND INTELLECTUAL PROPERTY RIGHTS IN AND TO THE SOFTWARE, AND COPIES MADE BY LICENSEE, ARE OWNED BY OR DULY LICENSED TO INFRASOFT. 86. THE LICENSING AGREEMENT SHOWS THAT THE LICENSE IS NON-EXCLUSIVE, NON-TRANSFERABLE AND THE SOFTWARE HAS TO BE USES IN ACCORDANCE WITH THE AGREEMENT. ONLY ONE COPY OF THE SOFTWARE IS BEI NG SUPPLIED FOR PAGE | 13 EACH SITE. THE LICENSEE IS PERMITTED TO MAKE ONLY O NE COPY OF THE SOFTWARE AND ASSOCIATED SUPPORT INFORMATION AND THA T ALSO FOR BACKUP PURPOSES. IT IS ALSO STIPULATED THAT THE COP Y SO MADE SHALL INCLUDE INFRASOFT'S COPYRIGHT AND OTHER PROPRIETARY NOTICES. ALL COPIES OF THE SOFTWARE ARE THE EXCLUSIVE PROPERTY O F INFRASOFT. THE SOFTWARE INCLUDES A LICENCE AUTHORISAT ION DEVICE, WHICH RESTRICTS THE USE OF THE SOFTWARE. THE SOFTWARE IS TO BE USED ONL Y FOR LICENSEE'S OWN BUSINESS AS DEFINED WITHIN THE INFRASOFT LICENC E SCHEDULE. WITHOUT THE CONSENT OF THE ASSESSEE THE SOFTWARE CA NNOT BE LOANED, RENTED, SOLD, SUBLICENSED OR TRANSFERRED TO ANY THI RD PARTY OR USED BY ANY PARENT, SUBSIDIARY OR AFFILIATED ENTITY OF LICE NSEE OR USED FOR THE OPERATION OF A SERVICEBUREAU OR FOR DATA PROCESSING . THE LICENSEE IS FURTHER RESTRICTED FROM MAKING COPIES, DECOMPILE, D ISASSEMBLE OR REVERSE-ENGINEER THE SOFTWARE WITHOUT INFRASOFT'S W RITTEN CONSENT. THE SOFTWARE CONTAINS A MECHANISM WHICH INFRASOFT M AY ACTIVATE TO DENY THE LICENSEE USE OF THE SOFTWARE IN THE EVENT THAT THE LICENSEE IS IN BREACH OF PAYMENT TERMS OR ANY OTHER PROVISIO NS OF THIS AGREEMENT. ALL COPYRIGHTS AND INTELLECTUAL PROPERTY RIGHTS IN AND TO THE SOFTWARE, AND COPIES MADE BY LICENSEE, ARE OWNE D BY OR DULY LICENSED TO INFRASOFT. 87. IN ORDER TO QUALIFY AS ROYALTY PAYMENT, IT IS N ECESSARY TO ESTABLISH THAT THERE IS TRANSFER OF ALL OR ANY RIGH TS (INCLUDING THE GRANTING OF ANY LICENCE) IN RESPECT OF COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK. IN ORDER TO TREAT THE CONSIDERA TION PAID BY THE LICENSEE AS ROYALTY, IT IS TO BE ESTABLISHED THAT T HE LICENSEE, BY MAKING SUCH PAYMENT, OBTAINS ALL OR ANY OF THE COPY RIGHT RIGHTS OF SUCH LITERARY WORK. DISTINCTION HAS TO BE MADE BETW EEN THE ACQUISITION OF A 'COPYRIGHT RIGHT' AND A 'COPYRIGHT ED ARTICLE'. COPYRIGHT IS DISTINCT FROM THE MATERIAL OBJECT, COP YRIGHTED. COPYRIGHT IS AN INTANGIBLE INCORPOREAL RIGHT IN THE NATURE OF A PRIVILEGE, QUITE INDEPENDENT OF ANY MATERIAL SUBSTA NCE, SUCH AS A MANUSCRIPT. JUST BECAUSE ONE HAS THE COPYRIGHTED AR TICLE, IT DOES NOT FOLLOW THAT ONE HAS ALSO THE COPYRIGHT IN IT. IT DO ES NOT AMOUNT TO TRANSFER OF ALL OR ANY RIGHT INCLUDING LICENCE IN R ESPECT OF COPYRIGHT. COPYRIGHT OR EVEN RIGHT TO USE COPYRIGHT IS DISTING UISHABLE FROM SALE CONSIDERATION PAID FOR 'COPYRIGHTED' ARTICLE. THIS SALE CONSIDERATION IS FOR PURCHASE OF GOODS AND IS NOT ROYALTY. 88. THE LICENSE GRANTED BY THE ASSESSEE IS LIMITED TO THOSE NECESSARY TO ENABLE THE LICENSEE TO OPERATE THE PROGRAM. THE RIGHTS TRANSFERRED ARESPECIFIC TO THE NATURE OF COMPUTER PROGRAMS. COP YING THE PROGRAM ONTO THE COMPUTER'S HARD DRIVE OR RANDOM AC CESS MEMORY PAGE | 14 OR MAKING AN ARCHIVAL COPY IS AN ESSENTIAL STEP IN UTILIZING THE PROGRAM. THEREFORE, RIGHTS IN RELATION TO THESE ACT S OF COPYING, WHERETHEY DO NO MORE THAN ENABLE THE EFFECTIVE OPER ATION OF THE PROGRAM BY THE USER, SHOULD BE DISREGARDED IN ANALY ZING THE CHARACTER OF THE TRANSACTION FOR TAX PURPOSES. PAYM ENTS IN THESE TYPES OF TRANSACTIONS WOULD BE DEALT WITH AS BUSINE SS INCOME IN ACCORDANCE WITH ARTICLE 7. 89. THERE IS A CLEAR DISTINCTION BETWEEN ROYALTY PA ID ON TRANSFER OF COPYRIGHT RIGHTS AND CONSIDERATION FOR TRANSFER OF COPYRIGHTED ARTICLES. RIGHT TO USE A COPYRIGHTED ARTICLE OR PRO DUCT WITH THE OWNER RETAINING HIS COPYRIGHT, IS NOT THE SAME THING AS T RANSFERRING 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 ANG LE, A NON - EXCLUSIVE AND NON-TRANSFERABLE LICENCE ENABLING THE USE OF A COPYRIGHTED PRODUCT CANNOT BE CONSTRUED AS AN AUTHO RITY TO ENJOY ANY OR ALL OF THE ENUMERATED RIGHTS INGRAINED IN AR TICLE 12 OF DTAA. WHERE THE PURPOSE OF THE LICENCE OR THE TRANSACTION IS ONLY TO RESTRICT USE OF THE COPYRIGHTED PRODUCT FOR INTERNAL BUSINES S PURPOSE, IT WOULD NOT BE LEGALLY CORRECT TO STATE THAT THE COPY RIGHT ITSELF OR RIGHT TO USE COPYRIGHT HAS BEEN TRANSFERRED TO ANY EXTENT . THE PARTING OF INTELLECTUAL PROPERTY RIGHTS INHERENT IN AND ATTACH ED TO THE SOFTWARE PRODUCT IN FAVOUR OF THE LICENSEE/CUSTOMER IS WHAT IS CONTEMPLATED BY THE TREATY. MERELY AUTHORIZING OR ENABLING A CUS TOMER TO HAVE THE BENEFIT OF DATA OR INSTRUCTIONS CONTAINED THEREIN W ITHOUT ANY FURTHER RIGHT TO DEAL WITH THEM INDEPENDENTLY DOES NOT, AMO UNT TO TRANSFER OF RIGHTS IN RELATION TO COPYRIGHT OR CONFERMENT OF TH E RIGHT OF USING THE COPYRIGHT. THE TRANSFER OF RIGHTS IN OR OVER COPYRI GHT 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 THE OWNER/ TRANSFEROR W HO DIVESTS HIMSELF OF THE RIGHTS HE POSSESSES PRO TANTO. 90. THE LICENSE GRANTED TO THE LICENSEE PERMITTING HIM TO DOWNLOAD THE COMPUTER PROGRAMME AND STORING IT IN THE COMPUT ER FOR HIS OWN USE IS ONLY INCIDENTAL TO THE FACILITY EXTENDED TO THE LICENSEE TO MAKE USE OF THE COPYRIGHTED PRODUCT FOR HIS INTERNAL BUS INESS PURPOSE. THE SAID PROCESS IS NECESSARY TO MAKE THE PROGRAMME FUN CTIONAL AND TO HAVE ACCESS TO IT AND IS QUALITATIVELY DIFFERENT FR OM THE RIGHT CONTEMPLATED BY THE SAID PARAGRAPH BECAUSE IT IS ON LY INTEGRAL TO THE USE OF COPYRIGHTED PRODUCT. APART FROM SUCH INCIDEN TAL FACILITY, THE PAGE | 15 LICENSEE HAS NO RIGHT TO DEAL WITH THE PRODUCT JUST AS THE OWNER WOULD BE IN A POSITION TO DO. 91. THERE IS NO TRANSFER OF ANY RIGHT IN RESPECT OF COPYRIGHT BY THE ASSESSEE AND IT IS A CASE OF MERE TRANSFER OF A COP YRIGHTED ARTICLE. THE PAYMENT IS FOR A COPYRIGHTED ARTICLE AND REPRES ENTS THE PURCHASE PRICE OF AN ARTICLE AND CANNOT BE CONSIDERED AS ROY ALTY EITHER UNDER THE INCOME TAX ACT OR UNDER THE DTAA. 92. THE LICENSEES ARE NOT ALLOWED TO EXPLOIT THE CO MPUTER SOFTWARE COMMERCIALLY, THEY HAVE ACQUIRED UNDER LICENCE AGRE EMENT, 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 ONL Y ONE COPY OF THE SOFTWARE AND ASSOCIATED SUPPORT INFORMATION FOR BAC KUP PURPOSES WITH A CONDITION THAT SUCH COPYRIGHT SHALL INCLUDE INFRASOFT COPYRIGHT AND ALL COPIES OF THE SOFTWARE SHALL BE EXCLUSIVE P ROPERTIES OF INFRASOFT. LICENSEE WAS ALLOWED TO USE THE SOFTWARE ONLY FOR ITS OWN BUSINESS AS SPECIFICALLY IDENTIFIED AND WAS NOT PER MITTED TO LOAN/RENT/SALE/SUB-LICENCE OR TRANSFER THE COPY OF SOFTWARE TO ANY THIRD PARTY WITHOUT THE CONSENT OF INFRASOFT. 93. THE LICENSEE 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 AN D COPIES MADE BY THE LICENSEE WERE OWNED BY INFRASOFT AND ONLY INFRA SOFT HAS THE POWER TO GRANT LICENCE RIGHTS FOR USE OF THE SOFTWA RE. THE LICENCE AGREEMENT STIPULATES THAT UPON TERMINATION OF THE A GREEMENT FOR ANY REASON, THE LICENCEE SHALL RETURN THE SOFTWARE INCL UDING SUPPORTING INFORMATION AND LICENCE AUTHORIZATION DEVICE TO INF RASOFT. 94. THE INCORPOREAL RIGHT TO THE SOFTWARE I.E. COPY RIGHT REMAINS WITH THE OWNER AND THE SAME WAS NOT TRANSFERRED BY THE A SSESSEE. THE RIGHT TO USE A COPYRIGHT IN A PROGRAMME IS TOTALLY DIFFERENT FROM THE RIGHT TO USE A PROGRAMME EMBEDDED IN A CASSETTE OR A CD WHICH MAY BE 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 BRING 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 WIT H THE OWNER AND THE LICENSEES HAVE ACQUIRED A COMPUTER PROGRAMME FO R BEING USED PAGE | 16 IN THEIR BUSINESS AND NO RIGHT IS GRANTED TO THEM T O UTILIZE THE COPYRIGHT OF A COMPUTER PROGRAMME AND THUS THE PAYM ENT FOR THE SAME IS NOT IN THE NATURE OF ROYALTY. 95. WE HAVE NOT EXAMINED THE EFFECT OF THE SUBSEQUE NT AMENDMENT TO SECTION 9 (1)(VI) OF THE ACT AND ALSO WHETHER THE A MOUNT RECEIVED FOR USE OF SOFTWARE WOULD BE ROYALTY IN TERMS THEREOF F OR THE REASON THAT THE ASSESSEE IS COVERED BY THE DTAA, THE PROVISIONS OF WHICH ARE MORE BENEFICIAL. 96. THE AMOUNT RECEIVED BY THE ASSESSEE UNDER THE L ICENCE AGREEMENT FOR ALLOWING THE USE OF THE SOFTWARE IS N OT ROYALTY UNDER THE DTAA. 97.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 USE THE COPYRIGHTED MATERIAL OR ARTICLE WH ICH IS CLEARLY DISTINCT FROM THE RIGHTS IN A COPYRIGHT. THE RIGHT THAT IS TRANSFERRED IS NOT A RIGHT TO USE THE COPYRIGHT BUT IS ONLY LIMITE D TO THE RIGHT TO USE THE COPYRIGHTED MATERIAL AND THE SAME DOES NOT GIVE RISE TO ANY ROYALTY INCOME AND WOULD BE BUSINESS INCOME. 98. WE ARE NOT IN AGREEMENT WITH THE DECISION OF TH E ANDHRA PRADESH HIGH COURT IN THE CASE OF SAMSUNG ELECTRONI CS CO. LTD.(SUPRA) THAT RIGHT TO MAKE A COPY OF THE SOFTWA RE AND STORING THE SAME IN THE HARD DISK OF THE DESIGNATED COMPUTER AN D TAKING BACKUP COPY WOULD AMOUNT TO COPYRIGHT WORK UNDER SECTION 1 4(1) OF THE COPYRIGHT ACT AND THE PAYMENT MADE FOR THE GRANT OF THE LICENCE FOR THE SAID PURPOSE WOULD CONSTITUTE ROYALTY. THE LICE NSE GRANTED TO THE LICENSEE PERMITTING HIM TO DOWNLOAD THE COMPUTER PR OGRAMME AND STORING IT IN THE COMPUTER FOR HIS OWN USE WAS ONLY INCIDENTAL TO THE FACILITY EXTENDED TO THE LICENSEE TO MAKE USE OF TH E COPYRIGHTED PRODUCT FOR HIS INTERNAL BUSINESS PURPOSE. THE SAID PROCESS WAS NECESSARY TO MAKE THE PROGRAMME FUNCTIONAL AND TO H AVE ACCESS TO IT AND IS QUALITATIVELY DIFFERENT FROM THE RIGHT CONTE MPLATED BY THE SAID PROVISION BECAUSE IT IS ONLY INTEGRAL TO THE USE OF COPYRIGHTED PRODUCT. THE RIGHT TO MAKE A BACKUP COPY PURELY AS A TEMPORARY PROTECTION AGAINST LOSS, DESTRUCTION OR DAMAGE HAS BEEN HELD BY THE DELHI HIGH COURT IN DITV. M/S NOKIA NETWORKS OY(SUP RA) AS NOT AMOUNTING TO ACQUIRING A COPYRIGHT IN THE SOFTWARE. 99. IN VIEW OF THE ABOVE WE ACCORDINGLY HOLD THAT W HAT HAS BEEN TRANSFERRED IS NOT COPYRIGHT OR THE RIGHT TO USE CO PYRIGHT BUT A PAGE | 17 LIMITED RIGHT TO USE THE COPYRIGHTED MATERIAL AND D OES NOT GIVE RISE TO ANY ROYALTY INCOME.' 107.LEARNED DEPARTMENTAL REPRESENTATIVE, EVEN AS HE VEHEMENTLY RELIED UPON AND SUPPORTED THE STAND OF THE AUTHORIT IES BELOW, COULD NOT POINT OUT ANY DISTINGUISHING FEATURE IN THIS CA SE. 108.IN VIEW OF THE ABOVE DISCUSSIONS, AND RESPECTFU LLY FOLLOWING THE ESTEEMED VIEWS OF HON'BLE JURISDICTIONAL HIGH COURT , WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION OF RS 2,52,70.569. THE ASSESS EE GETS THE RELIEF ACCORDINGLY. 47.THEREFORE, RESPECTFULLY FOLLOWING THE SECOND ORD ER OF THE COORDINATE BENCH WE HOLD THAT ROYALTY FROM BREW OPE RATOR AGREEMENT OF RS. 67848685/-AND 15% THEREOF AMOUNTIN G TO RS. 10177303/-IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE U/S 9(1)(VI) OF THE ACT AS WELL AS ARTICLE 12 OF THE IN DO-USA TAX TREATY. ACCORDINGLY, GROUND NO. 3 OF THE APPEAL OF THE ASSE SSEE IS ALLOWED. 10. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY DISTINGUISHABLE FEAT URE BROUGHT TO OUR NOTICE BY THE LD. DR, WE HOLD THAT THE ROYALTY FROM BREW OPERATOR AGREEMENT IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE U/S 9(1)(VI) OF THE IT ACT AS WELL AS ARTI CLE 12 OF THE INDO- USA DTAA. FOLLOWING SIMILAR REASONINGS, WE ALSO HO LD THAT THE CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE ROYALTY FROM TEST TO OLS AGREEMENT. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE ARE PARTLY ALLOWED. 12. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR A. Y 2014-15 AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURE BROUGHT TO OUR NOTICE BY TH E LD. DR AGAINST THE ORDER OF THE TRIBUNAL, WE HOLD THAT THE ROYALTY FROM PAGE | 18 BREW OPERATOR AGREEMENT IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE U/S 9(1)(VI) OF THE IT ACT AS WELL AS ARTICLE 12 OF THE INDO-US-DTAA. FOLLOWING SIMILAR REASONINGS, WE ALSO HOLD THAT THE CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE A CTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE ROYALTY FR OM TEST TOOLS AGREEMENT. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.2019. SD/- SD/- (H. S. SIDHU) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:- 01.07.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 01.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER