Cisco Systems International B.V., Bengaluru V. Deputy Commissioner Of Income Tax, International Taxation, Circle-1(1), Bengaluru

ITITA 761/BANG/2022

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The case involves Cisco Systems International B.V., which appealed against the assessment orders for the assessment years 2011-2012 and 2018-2019, where income from sale of software and support services was treated as 'royalty' and 'fees for technical services' under the Income Tax Act and DTAA between India and Netherlands. The Tribunal examined previous rulings and agreements, noting that the sale of software licenses and associated support services did not constitute royalty under the applicable DTAA. The Tribunal's decision was influenced by the Supreme Court's judgment in Engineering Analysis Centre for Excellence Pvt. Ltd. vs. CIT, which clarified the non-taxability of such transactions under Indian tax law.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 115257 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 18-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowedPartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 14-12-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 01-09-2022
• Other Referred Cases: Engineering Analysis Center of Excellence Pvt. Ltd. Vs. CIT, Samsung Electronics Co Ltd, Synopsis International Old Ltd
• Laws Referred To: Income Tax Act, DTAA between India and Netherlands, Copyright Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Question of law; TDS; Set aside
• Section: 148; 143(3); 195; 201; 144C; 139(1); 9(1); 9(1); 9(1); 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K. and Shri Laxmi Prasad Sahu, AM IT(IT)A No.760 /Bang/2022 : Asst.Year 2011-2012 IT(IT)A No.761/Bang/2022 : Asst.Year 2018-2019 CISCO Systems International B.V, C/o Ernst & Young LLP (Authorized Representative) ‘Divyashree Chambers, First Floor, ‘A’ Wing, #11, O’Shaughnessy Road, Langford Gardens, Bengaluru-560 025. PAN NO : AADCC 9201 D v. The Dy. Commissioner of Income Tax, (International Taxation) Circle-1(1) Bangalore.. (Appellant) (Respondent) Appellant by : Shri Nageshwar Rao, Advocate. Respondent by : Smt. S. Praveena CIT DR. Date of Hearing : 08.12.2022 Date of Pronouncement : 16.12.2022 O R D E R Per Laxmi Prasad Sahu, Accountant Member : These two appeals have been filed by the assessee against the separate final assessment order by the assessing officer (AO) u/s 143(3) r.w.s. 147, 92CA and 144C of the Act. and 143(3) r.w.s. 144C(13) respectively. The core issue raised and argued by the ld. AR of the assessee in these appeals is receipt from sale of software and providing support services to the Indian company is not to be treated as “royalty” and ‘fees for technical services’ as per the DTAA between India and Netherlands. Since the issues are similar for both the IT(IT)A Nos.760-761/Bang/2022. 2 Assessment Years (AY) except ground No.7 for the assessment year 2011-12, therefore, we are taking first to the AY 2018-19 and the decision shall apply mutatis mutandis for the AY 2011-12. 2. The assessee filed Nil return of income and claimed entire TDS refund whereas as per Form No. 26AS the assessee received payment of Rs. 5105.73 Crores. The case was selected for scrutiny and statutory notices were issued to the assessee. On observation of the assessment order passed by the AO at para No.2 he noted that the facts and issues are similar for assessment year 2015-16, 2016-17 and 2017-18 and during the course of scrutiny proceedings, the details have been examined for the aforesaid assessment years and it was also noted that the submissions made during the proceedings for assessment year 2018-19 are similar to the ones made during the scrutiny proceedings for the earlier assessment years. After examining the details, the AO has made additions under the head ‘Royalty’ to the extent of Rs.302.22 crores and under the head fees for technical services. He made addition of Rs.1473.77 crores. Aggrieved by the above additions, the assessee filed appeal before us. 3. The ld.AR reiterated the submissions made before the lower authorities. He further submitted that the similar issue has been decided by the coordinate bench of the Tribunal in ITA No.1415/Bang/2019 for the assessment year 2016-17 vide order 30/09/2021, in IT(ITA) No.2542/Bang/2018 for the assessment year 2014-15 & 2015-16 vide order dated 02.07.2021, in IT(IT)A No.1415/Bang/2019 for assessment year 2016-17 vide order dated 30.09.2021 and in IT(IT)A No.188/Bang/2021 for assessment year IT(IT)A Nos.760-761/Bang/2022. 3 2017-18 vide order dated 12.10.2021 in assessee’s favour only the figures are different in the impugned assessment year. He further submitted that in the assessment year 2016-17, the Tribunal has examined the agreements in detail and which has been incorporated in the order and he further submitted that facts is also same and no changes has been done in any clause of the agreements. The Tribunal has held that sale of software licence cannot be categorized as royalty under DTAA, therefore, the decision in assesse’s own case for previous assessment years will clearly apply. He further submitted that the Tribunal has relied on the judgment of Hon’ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt. Ltd., Vs. CIT. reported in (2021) 125 taxmann.com 432. He has also field paper book contains page nos.1 to 1371 and another paper book containing page nos.1to 846. The ld.AR further submitted that the case law relied by the AO is not applicable. 4. The ld.DR vehemently argued his case and he relied on the order of the lower authorities. He further submitted that the judgment of Hon’ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt. Ltd., Vs. CIT has not been accepted by the revenue department and he further submitted the facts of the case are different in above cited judgment. As per the judgment of Hon’ble Supreme Court if the owner of software part with any of the rights that are listed in section 14b of the Copyright Act r.w.s.s (a) (i) – (vii) thereof , it would be a case of parting with right in Copyright and would then amounts to royalty. In the assessee’s case if facts are part with atleast one of the right listed in 14b r.w.s 14(a) and Copyright Act, hence the IT(IT)A Nos.760-761/Bang/2022. 4 payment to nonresident is in the nature of royalty, , which is evident from the agreement clause discussed by the AO. The judgment of Hon’ble Supreme Court is only on the basis of 4 modules EULA, which did not cover the this fact pattern. Therefore, the judgment of Hon’ble Supreme Court is not applicable. Hence, the entire addition made by the AO is taxable in the hands of the assessee under both the heads. 5. Considering the rival submissions, we are of the opinion that the AR of the assessee relied on the judgment of assessee’s own case for the above noted assessment years cited supra. We also note that the facts are remain unchanged and the coordinate bench of the Tribunal in ITA No.2016-17 in IT(IT)A NO.1415/Bang/2019 vide order dated 30.09.2021 has discussed the issue in detail. For the sake of convenience we are reproducing the same hereunder:- “2. The Ld. A.R. submitted that the assessee is a company incorporated and operating in Netherlands and hence, it is a tax resident of Netherlands. During the year under consideration, the assessee has sold software to Indian customers. The assessee is engaged in business of selling software. The sales proceeds received by the assessee was Rs.1132.10 crores. The A.O. held that the above said sale proceeds constitute royalty both u/s 9)1)(vi) of the Act and under DTAA entered between India and Netherlands. Accordingly the A.O. passed the draft assessment order proposing to assess Rs.1132.10 crores as royalty income in the hands of the assessee. The assessee objected the same by filing its objections before Ld. DRP. However, the Ld. DRP noticed that it has affirmed the view taken by the A.O. in the assessment year 2014-15 by following the decision rendered by Hon’ble High Court of Karnataka in the case of Samsung Electronics Ltd. (345 ITR 494) and certain other decisions. Accordingly, the Ld. DRP rejected the objections filed by the assessee. Accordingly, the A.O. passed the final assessment order determining the income of the assessee at Rs.1132.10 cores. 3. The Ld. A.R. submitted that the A.O. has assessed the sale proceeds of software as royalty in assessment year 2014-15 and IT(IT)A Nos.760-761/Bang/2022. 5 2015-16 also. The assessee has challenged the said decision by filing appeal before ITAT. He submitted that the ITAT has since disposed the appeals vide its orders dated 2.7.2021 passed in IT(IT)A No.2542/Bang/2018 & IT(TP)A No.2812/Bang/201 relating to assessment year 2014-15 & 2015-16 and the Tribunal has deleted the additions by following the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre for Excellence Pvt. Ltd. Vs. CIT (2021) 125 taxmann.com 432. The Ld. A.R. submitted that the facts prevailing in the instant year is identical with the facts available in assessment 2014-15 & 2015-16 and hence the decision rendered by coordinate bench may kindly be followed. 4. On the contrary, the Ld. D.R. invited our attention to the draft assessment order more particularly in para 4 of the assessment order. The Ld. D.R. submitted that the assessee has not furnished any details/documents before the A.O. except furnishing certain sample copies of 3 to 4 agreements. Hence, the A.O. was constrained to pass the order after considering the system integrator agreement and software license agreement obtained during the course of hearings for assessment year 2014-15. The Ld. D.R. submitted that the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (supra) cannot be blindly followed and it is required to examine the agreement entered between the assessee and the buyers of software in order to find out whether there was transfer of copy right. Accordingly, the Ld. D.R. submitted that the entire issues may be restored to the file of the A.O. for examining it afresh and assessee may be directed to furnish the agreements that may be called for by the A.O. 5. In the rejoinder, the Ld. A.R. submitted that the facts prevailing in 2014-15 and in this year are identical. He submitted that there is no change in the agreement entered by the assessee with the buyers of software. He further submitted that the A.O. examined the various clauses of systems integrated agreements and software license agreement and extracted the same in the assessment order of the year under consideration. He submitted that a reading of the clauses extracted by the A.O. would show no copy right is passed on to the buyer of the software. Accordingly, he submitted that the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. (supra) will squarely apply to the facts of the present case and IT(IT)A Nos.760-761/Bang/2022. 6 hence the sale consideration received by the assessee on sale of software licenses shall not become royalty within the meaning of DTAA entered between India and Netherlands. 6. We heard the rival contentions and perused the record. We notice that the assessee is entering into two types of agreement with its customers namely “Systems integrated agreement” and “Software license agreement”. We notice that the A.O. has extracted relevant clauses from both the agreements in the assessment order. For the sake of convenience, we extract below the relevant portion of the assessment order. “ 6. The relevant portions from the Systems Integrator Agreement are reproduced below: 9.0 INTELLECTUAL PROPERTY RIGHTS AND SOFTWARE LICENSING: 9.1 Subject to the terms and conditions of the Agreement, Cisco grants to Integrator a non-exclusive, non-transferable license. (a) to use the Software and Documentation for Integrator’s Internal Use under the terms as set out in Exhibit C; and, (b) during the term of this Agreement to market and Resell the Software (including related Documentation) directly to End Users, solely as permitted by this Section of this Agreement, in the Territory, or, in the case of Special License Software, to grant to End Users Sublicenses to the Special License Software (including related Documentation)subject to the terms and conditions of this Section and the Special License Terms. Any Resale of any item of Software or Documentation to any person or entity other than Integrator itself that is not an End User of such Software or Documentation, including to any other Cisco Integrator purchasing or licensing such Software or Documentation for purposes of Resale, is expressly prohibited. 9.2 The license granted herein shall be for use of the Software Documentation in object code format only and solely as provided in Exhibit C. Integrator may not sublicense, to any person or entity, its rights to distribute or sublicense the Software. Integrator shall provide a copy of the applicable Software License Agreement to each End User of the Software prior to installation of the Software. 7. Further, the following portion from the said agreement clarifies the grant of right to use the name, logo, trademarks and other marks of Cisco. 11.0 TRADEMARK USAGE. 11.1 Cisco grants to Integrator the right to use the name, logo, trademarks, and other marks of Cisco (collectively, the “Marks”) for IT(IT)A Nos.760-761/Bang/2022. 7 all proper purposes in the sale of Cisco Products and Services to End Users and the performance of Integrator’s duties hereunder only so long as this Agreement is in effect. Integrator’s use of such Marks shall be in accordance with Cisco’s policies including, but not limited to trademark usage and advertising policies, and be subject to Cisco’s prior written approval. Integrator agrees not to attach to any Products any trademarks, trade names, logos, or labels other than an aesthetically proper label identifying the Integrator, its location and its relationship to Cisco. Integrator further agrees not to affix any Marks to products other than genuine Products. 8. The relevant portion of the Software License Agreement is reproduced below showing the License restrictions: 2.0 LICENSE RESTRICTIONS 2.1 If CISCO NAM Software is licensed to a Service Provider by an Integrator, Integrator may grant Service Provider the non- exclusive, nontransferable license to distribute Remote Site Software in the Territory to its End Users subject to these Special License Terms on a temporary basis while Service Provider is providing call centre services via the CISCO NAM Software to such End User. Service Provider’s license to such End User must be via a Sublicense between Service Provider and End User where this Sublicense meets the requirements set forth in the Agreement to which this Exhibit is attached. Integrator shall ensure that Service Provider is bound and will abide by the Special License Terms for CISCO NAM Software. 9. The relevant portion relating to the Integrator Rights and obligations are shown below: 3. INTEGRATOR RIGHTS AND OBLIGATIONS. 3.1 Resale of Services, Integrator is authorized on a non- exclusive basis, to resell Services to End Users pursuant to the provisions of this Appendix C. Accordingly, upon such resale of any such Services, Integrator shall provide to End User a copy of the corresponding Program Description for each Service resold by Integrator to each End User. 10. The assessee has claimed that the entire receipts pertained to service fees charged by the assessee to its customers in India for networking domain, relation configuration support etc. It is evident from the agreement that the services are merely incidental to the actual sale of software and grant of remarketing of software. The relevant portion relating to the Rights and obligations of the assessee have been shown in the next page. IT(IT)A Nos.760-761/Bang/2022. 8 3.0 CISCO RIGHTS AND OBLIGATIONS In consideration of the service fee paid by Integrator, Cisco will provide the following services to Integrator: 3.1 Technical Support 3.1.1 Cisco shall provide 24 hour 7 day a week access to Cisco’s TAC. Cisco will use its best endeavors to respond to Integrator within one (1) hour for all calls received during Standard Business Hours and to Priority 1 and 2 calls received outside Standard Business Hours. For Priority 3 and 4 calls received outside Standard Business Hours, Cisco will respond no later than the next business day. 3.1.2 Cisco will provide Third Level Support on all Products except Category A Product for which Cisco will provide Second Level Support and Third Level Support. 3.1.3 Cisco will supply the appropriate level of technical resources based on problem priority and elapsed time to assist Integrator with problem resolution and to ensure adherence to Cisco’s Problem Prioritization and Escalation Guideline as described in Appendix A. If mutually agreed that Cisco on-site technical resources are required for resolution, Cisco will dispatch the necessary level of technical support to assist Integrator. 3.2 Software support 3.2.1 Software Releases. Cisco will make available Software Updates as follows: 3.2.1.1 For Software under ASD, one (1) compact disc master containing the Update image(s) and update instructions. 3.2.1.2. For category S Product, Maintenance Releases, if released by Cisco, will be provided to Integrator upon request. In order to receive Major Releases and Version Releases, Integrator must subscribe to the SSP Program. 3.2.1.3 For all other Software Updates, if released by Cisco, will be provided to Integrator upon request. 3.2.2 Release Support. Cisco will support each Major Release and Version Release in accordance with the Cisco End-of-Life policy as posted at http://www.cisco.com /end/US/products/products_end-of-life_policy.html.Cisco, in meeting any support obligations, may require an upgrade to a subsequent release. 3.2.3 Software patches. When required, Cisco will provide new Software to Integrator to correct a problem, or provide a networkbootable Software image, as Integrator and Cisco agree. IT(IT)A Nos.760-761/Bang/2022. 9 3.3 Hardware support. Cisco will provide Advance Replacement service for Hardware as follows: 3.3.1 Cisco shall provide Advance Replacement service as follows: Cisco will ship the replacement non-configured Service Part the same business day providing the request for shipment is made prior to 3.00PM Pacific Standard Time, Monday through Friday, excluding Cisco-observed holidays. For requests after 3.00PM Pacific Standard Time, the Advance Replacement will be shipped the following Cisco business day. 3.3.2 All replacements are shipped using Cisco’s preferred carrier, freight prepaid by Cisco. 3.3.3 Product used for replacement may be new or equivalent to new, at Cisco’s discretion. 3.3.4 The Advance Replacement Service described in Section 3.3.1 for Product supported by Integrator which was purchased prior to the Effective Date of this Exhibit will take effect thirty (30) days after the Effective Date, provided that Cisco may refuse to provide such service for any Product where Cisco in its sole discretion is not satisfied that all required support fees with respect to such Product have been paid. 11. The relevant portion highlighting that the Indian party is licensed to distribute software is shown below: 9.0 SOFTWARE LICENSE: Integrator acknowledges that it may receive Software as a result of services provided under this Exhibit. Integrator agrees that it is licensed to distribute such Software only on Product covered under this Exhibit and subject to the terms and conditions of the Software license granted with the original purchase of the Product and with respect to which all applicable fees have been paid. Integrator shall not copy, in whole or in part, Software or documentation modify the Software, reverse compile or reverse assemble all or any portion of the Software, or rent, lease, distribute, sell, or create derivative works of the Software. Integrator shall not upgrade to a feature set other than that which was licensed than that which was licensed at the time of original Product purchase unless applicable license fees are paid. 12. From the above details, it is evident that the assessee has entered into sale of software and grant of use and right to use the software and further license to distribute the same to end users and the services claimed to have been offered to the said parties are only incidental to the Integrator Agreement and not the main aspect as IT(IT)A Nos.760-761/Bang/2022. 10 projected by the assessee for which no amount has been offered to tax in India.” 7. It is the submission of Ld. A.R. that there is no change in terms and conditions of the agreement in the year under consideration also. He submitted that the assessee is not transferring any copy right, but granting only user license. Accordingly, it has been contended that the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (supra) was rightly applied by the co-ordinate bench in AY 2014-15 and the same should be followed in this year also. 8. In the instant case, we noticed that the AO has extracted relevant clauses of the agreement in the assessment order and they are reproduced by us in the preceding paragraphs. A perusal of the same would show that the assessee is granting license to the integrators and also authorizing the integrator to grant license only for the purpose of using the software. An identical issue of granting license to use software was examined in the context of its taxability as royalty by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (supra). The Hon'ble Supreme Court examined this question considering four types of situations, which has been narrated as under:- “4. The appeals before us may be grouped into four categories: (i) The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, non-resident supplier or manufacturer. (ii) The second category of cases deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users. The third category concerns cases wherein the distr (iii) ibutor happens to be a foreign, ident vendor, who, after purchasing software from a foreign, non- resident seller, resells the same to resident Indian distributors or end-users. (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users. 9. The Hon'ble Supreme Court analysed sample agreements in respect of all the four categories and gave the following finding:- “45. A reading of the aforesaid distribution agreement would show that what is granted to the distributor is only a nonexclusive, non-transferable license to resell computer software, it being IT(IT)A Nos.760-761/Bang/2022. 11 expressly stipulated that no copyright in the computer programme is transferred either to the distributor or to the ultimate end-user. This is further amplified by stating that apart from a right to use the computer programme by the end-user himself, there is no further right to sub-license or transfer, nor is there any right to reverse- engineer, modify, reproduce in any manner otherwise than permitted by the license to the end-user. What is paid by way of consideration, therefore, by the distributor in India to the foreign, non-resident manufacturer or supplier, is the price of the computer programme as goods, either in a medium which stores the software or in a medium by which software is embedded in hardware, which may be then further resold by the distributor to the end-user in India, the distributor making a profit on such resale. Importantly, the distributor does not get the right to use the product at all. 46. When it comes to an end-user who is directly sold the computer programme, such end-user can only use it by installing it in the computer hardware owned by the end-user and cannot in any manner reproduce the same for sale or transfer, contrary to the terms imposed by the EULA. 47. In all these cases, the "license" that is granted vide the EULA, is not a license in terms of section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in sections 14(a) and 14(b) of the Copyright Act, but is a "license" which imposes restrictions or conditions for the use of computer software. Thus, it cannot be said that any of the EULAs that we are concerned with are referable to section 30 of the Copyright Act, inasmuch as section 30 of the Copyright Act speaks of granting an interest in any of the rights mentioned in sections 14(a) and 14(b) of the Copyright Act. The EULAs in all the appeals before us do not grant any such right or interest, least of all, a right or interest to reproduce the computer software. In point of fact, such reproduction is expressly interdicted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of license or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each book. Importantly, there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of IT(IT)A Nos.760-761/Bang/2022. 12 the same. On the other hand, if an English publisher were to sell the same book to an Indian publisher, this time with the right to reproduce and make copies of the aforesaid book with the permission of the author, it can be said that copyright in the book has been transferred by way of license or otherwise, and what the Indian publisher will pay for, is the right to reproduce the book, which can then be characterised as royalty for the exclusive right to reproduce the book in the territory mentioned by the license. 10. After analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with non- resident software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:- “CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end- users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to nonresident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment.” 11. We also notice that the decision rendered by Hon’ble Karnataka High Court in the case of Samsung Electronics Co Ltd (supra) has been reversed by Hon’ble Supreme Court in paragraph 101-102 of its order. Similarly, the decision rendered in the case of Synopsis International Old Ltd (supra) by Hon’ble Karnataka High Court has been reversed in paragraph 103 – 109 of its order. Before IT(IT)A Nos.760-761/Bang/2022. 13 us, the Ld. A.R. submitted that the terms of agreements remain the same during the year under consideration also. Accordingly, as per the decision rendered by Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. (supra), sale proceeds received by the assessee on sale of software licenses cannot be categorized as “Royalty” within the meaning of provisions of DTAA. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the addition made as “royalty” income. 12. In the result, the appeal filed by the assessee is allowed. 6. We also note that coordinate bench of the Tribunal in assessee’s own case for the assessment year 2017-18 in IT(IT)A No.11/Bang/2021 decided the issue in favour of the assessee, which is reproduced hereunder:- “6. We have perused submissions advanced by both sides in light of records placed before us. 7. We note that Hon’ble Supreme Court in case of Engineering Analysis Centre for Excellent Pvt. Ltd. vs CIT (supra) while considering the issue had looked into the ratio is laid down by the jurisdictional High Court, and the other decisions that was relied on by the Ld.AO. Hon’ble Supreme Court in paragraph 27,47,52,168 & 169 observed as under: 24. The Apex Court in the aforesaid case has held in paragraphs 27, 47, 52, 168 & 169 as under: "27. The machinery provision contained in Section 195 of the Income Tax Act is inextricably linked with the charging provision contained in Section 9 read with Section 4 o the Income Tax Act, as a result of which, a person resident in India, responsible for paying a sum of money, "chargeable under the provisions of [the] Act", to a non-resident, shall at the time of credit of such amount to the account of the payee in any mode, deduct tax at source at the rate in force which, under Section (37A)(iii) of the Page Income. Tax Act, is the rate in force prescribed by the DTAA. Importantly, such deduction is only to be made if 'the non-resident is liable to pay tax under the charging provision contained in Section 9 read with Section 4 of the Income Tax Act, ,read with the DTAA. Thus, it is only IT(IT)A Nos.760-761/Bang/2022. 14 when the nonresident is liable to pay income tax in India on income deemed to arise in India and no deduction of TDS is made under Sector 105(1) of the Income Tax Act, or such perion has, after applying Section 195(2) of the Income Tax Act, not deducted such proportion of tax as is required, that the consequences of a failure to deduct and pay, reflected in Section 201 of the Income Tax Act, follow, by virtue of which the resident-payee is deemed an "assessee in default", and thus, is made liable to pay tax, interest and penalty thereon. This position is also made amply clear by the referral order in the concerned appeals from the High Court of Karnataka, namely, the judgment of this Court in GE Technology (supra). 47. In all these cases, the "licence" that is granted vide the EULA, is riot a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights contained in Sections 14(a) and 14(b) of the Copyright Act, but s a "licence" which imposes restrictions or conditions for the use of computer software. Thus it cannot be said that any of the EULAs that we are concerned with are referred lo Section 30 of the Copyright Act, inasmuch as Section 30 of the Copyright Act speaks of granting ar1 interest in any of the rights mentioned in Sections 14(a) and 14(b) of the Copyright Act. The EULAs in all the appeals before us do not grant any such right or interest, !east of all, a right or interest to reproduce the computer software. In point of fact, such reproduction is expressly interdicted, and it is also expressly stated that no vestige of copyright is at all transferred, either to the distributor or to the end-user. A simple illustration to explain the aforesaid position will suffice. If an English publisher sells 2000 copies of a particular book to an Indian distributor, who then resells the same at a profit, no copyright in the aforesaid book is transferred to the Indian distributor, either by way of licence or otherwise, inasmuch as the Indian distributor only makes a profit on the sale of each hook. Importantly, there is no right in the Indian distributor to reproduce the aforesaid book and then sell copies of the same. On the other hand, if an English publisher were to sell the same book to an Indian publisher, this time with the right to reproduced and make copies of the aforesaid book with the permission of the author it can be said the copyright in the book has been transferred by way of licence or otherwise, and what the Indian publisher will pay for, is the right to reproduce the book, which can then be characterized as royalty for the exclusive right to reproduce the book in the territory mentioned by the licence. IT(IT)A Nos.760-761/Bang/2022. 15 52. There can be no doubt as to the real nature of the transactions in the appeals before us. What is "licensed" by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods, which, as has been correctly pointed out by the learned counsel for the assessees, the law declared by this Court in the context of sales tax statute in Tata Consultancy Services v. State of A.P., 2005(1) SCC 308 (see paragraph 27). 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this Judgment, it is clear that there is no obligation on the persons mentioned in S.195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/endusers, which would amount o the use of or right to use any copyright. The provisions contained in the Income Tax Act (S. 9(1) (vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the asessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty' for the use of copyright in the computer software and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in Section 195 of the Income Tax Act were not liable to deduce any TDS under Section 195 of the Income Tax Act. The answer to this question will apply to all, four categories of cases enumerated by us, in paragraph-4 of this judgment. 8. In the light of the aforesaid judgment delivered by the Hon'ble Supreme Court, the question of law framed in the present appeal is decided in favour of the assessee and against the revenue. 8. Similar view has been taken by the co-ordinate bench in IT(TP)A No. 2542/Bang/2018 & 2812/Bang/2017 order dated 02.07.2021. In the light of the above observations, and respectfully following the decision of Hon’ble Supreme Court, we are of the view that Ld.CIT(A) erred in treating the receipts from sale of software with the support services as royalty. Accordingly grounds raised by assessee stands allowed.” IT(IT)A Nos.760-761/Bang/2022. 16 7. Since the issue involved in the impugned case are similar as decided in the above cited decisions, we respectfully follow the same, the ground nos.1 to 3 raised by the assessee are allowed. 8. In respect of ground No.4, the assessee raised issue that the full tax credit has not been granted to the assessee. In this regard it is directed to the AO after due verification the TDS may be granted as per law. Therefore, the ground No.4 is allowed for statistical purposes. 9. Ground No.5 is consequential in nature. 10. In the result, the appeal for assessment year 2018-19 is partly allowed for statistical purposes. ITA No.760/Bang/2022 11. Ground No.1 to 3 are not pressed by the assessee, hence it does not require any adjudication. 12. Ground No.4 to 6 - The ld.AR submitted that the assessment year 2018-19 is a lead year and the facts are similar. 13. Having gone through the issue involved in the impugned assessment year, we found substance on the submission of ld.AR, therefore, the decision taken in the assessment year 2018-19 referred ground Nos.1 to 3 decided supra are squarely applicable in this case, IT(IT)A Nos.760-761/Bang/2022. 17 therefore, the decision taken in the assessment year 2018-19 shall mutants mutandis apply in this case also. Accordingly, ground No.4 to 6 are allowed. 13. In respect of Ground No.7 and 8 Since the assessee did not file his return of income as per section 139(1) of the Act, the case has been reopened after issuing notice u/s 148 of the Act dated 31/03/2018 and the assessment has been completed as per sec.143(3) r.w.s 147, 92CA and 144C of the Act, these are consequential in nature. 14. In the result, the appeal of the assessee is partly allowed. 15. In the combined result, the appeals filed by the assessee for assessment years 2011-2012 and 2018-2019 are partly allowed for statistical purposes. A common order passed be kept in respective case files. Order pronounced on this 16th day of December, 2022. Sd/- (George George K) Sd/- (Laxmi Prasad Sahu) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated : 16 th December, 2022. Vms IT(IT)A Nos.760-761/Bang/2022. 18 Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-11, Bangalore. 4. The Pr.CIT (Central), Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst. Registrar/ITAT, Bangalore IT(IT)A Nos.760-761/Bang/2022. 19 1. Date of Dictation .......................................... 2. Date on which the typed draft is placed before the dictating Member ......................... 3. Date on which the approved draft comes to Sr.P.S ................................... 4. Date on which the fair order is placed before the dictating Member .................... 5. Date on which the fair order comes back to the Sr. P.S. ....................... 6. Date of uploading the order on website................................... 7. If not uploaded, furnish the reason for doing so ................................ 8. Date on which the file goes to the Bench Clerk ....................... 9. Date on which order goes for Xerox & endorsement.......................................... 10. Date on which the file goes to the Head Clerk ......................... 11. The date on which the file goes to the Assistant Registrar for signature on the order ..................................... 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order ............................... 13. Date of Despatch of Order. .....................................................