The Delhi bench of the ITAT has held that the assesee, HP Services (Singapore) cannot be taxed for royalty as per the Indo-Singapore DTAA for purchasing the software from Microsoft company.
The Revenue claimed that the transaction of sale of computer software to its customers implicit involved making of multiple copies of the software clearly indicates „transfer of copyright‟ and therefore the consideration received qua said transactions amounts to “royalty” as per the Act and DTAA.
The Assessee on the contrary, claimed that the Assessee purchasing the software from “Microsoft company” and as per terms of the agreement with “Microsoft” having no right to reproduce or to make any change in “off the shelf software” and therefore, the question of passing a right by the Assessee to its customers does not arise.
The Tribunal bench comprising Shri R. K. Panda, Accountant Member And Shri N. K. Choudhry, Judicial Member observed that the Apex Court in para no 173 of its judgment in the case of Engineering Analysis Centre of Excellence Pvt. Ltd (supra), clearly held that the amounts paid by resident Indian end-users/distributors to non-resident 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.
While holding in favour of the assessee, the Tribunal held that “Since, the issue of law raised in the present appeals has been conclusively decided in the favour of the assessee by the Supreme Court, no substantial question of law arises for consideration in the present appeals. It is also pertinent to mention that the appellant had admitted before the ITAT that the dispute in question had been decided in favour of the assessee by the Tribunal in earlier years. Accordingly, the present appeals are dismissed.”
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