Mere Software usage Charges can’t be treated as Royalty: ITAT grants Relief to Trigo [Read Order]

ITAT - Trigo - Taxscan

In a major relief to Trigo SAS, the Pune Bench of Income Tax Appellate Tribunal (ITAT) ruled that mere Software usage charges cannot be treated like royalty.

The assessee company, Trigo SAS has entered into Software License Agreement with Trigo India wherein it grants Trigo India a right to use of software “ANTIFOG‟ pursuant to which the assessee company has earned income of Rs.13,51,464/- from Trigo India. A copy of the agreement was submitted before the Department. The Company has developed the software program marketed under the name “ANTIFOG”. This software is dedicated to the specific needs of quality control in the automobile sector allowing daily complete management of the follow up of the operations of sorting and retouching as well as the accounting of the working time. The assessee has also submitted regarding restrictions in the said agreement wherein the licensee i.e. Trigo India shall not modify, copy, duplicate, reproduce, license, or sublicense in whole or in part the software or transfer, rent, lease, etc. without the prior written consent of TRIGO SAS, the assessee herein.

Before the CIT(Appeal), the assessee submitted that he has merely transferred the right to use copyrighted software ANTIFOG and that no transfer of copyright to Trigo India has taken place in this case, and therefore, payments for the use of the software fall out of the definition of royalty.

The coram headed by the Vice President, R.S. Syal, and Judicial Member Partha Sarthi Chaudhury pointed out that the assessee has merely transferred the right to use copyrighted software ANTIFOG and that it had not transferred the copyright itself to Trigo India. TRIGO India was authorized to have access to and make use of the copyrighted software ANTIFOG. In the Software License Agreement entered into, it is evident that the assessee i.e. Trigo SAS is “Licensor” and TRIGO Quality Production Services Pvt. Ltd. which is an Indian Company as a “Licensee”.

Therefore, the ITAT held that CIT(A) erred in confirming the addition of software usage charges amounting to Rs.13,51,464 received by the appellant by treating it like royalty.

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Trigo SAS vs Deputy Commissioner of Income Tax

Date of Judgement:   2021 TAXSCAN (ITAT) 225

Counsel for Appellant:   Shri Ketan Ved

Counsel for Respondent:   Shri Mahadevan A M Krishnan


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