Amount paid by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers is not royalty

IN THE INCOME TAX APPELLATE TRIBUNAL
“C” BENCH : BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER

ITA Nos.2431 & 2432/Bang/2018
Assessment years : 2013-14 & 2014-15

Citrix Systems Asia Pacific
Proprietary Limited,
[Level 5, 66 Waterloo Road,
Macquarie Park, NSW – 2113,
Australia]
C/o. Citrix R&D India Pvt. Ltd.,
2nd & 3rd Floor, Cherry Hills,
8/2B-9, Intermediate Ring Road,
Embassy Golf Links Business Park,
Domlur, Bangalore – 560 071.
PAN: AADCC 8874E
APPELLANT 

Vs. 

The Income Tax Officer,
Ward 1(1),
Bangalore.
RESPONDENT

Appellant by : Shri T. Suryanarayana, Advocate
Respondent by : Shri Pradeep Kumar, CIT(DR)(ITAT), Bengaluru.

Date of hearing : 05.07.2021
Date of Pronouncement : 12.07 .2021

O R D E R

Per Chandra Poojari, Accountant Member

 These appeals are directed against the separate orders dated 15.6.2018 of the CIT(Appeals)-12, Bengaluru for the assessment years 2013-14 & 2014-15.

2. The common grounds of appeal raised by the assessee in these appeals are as follows:-

“1. That the impugned order passed by the CIT(A), to the extent questioned herein, is bad in law and on facts and is, therefore, liable to be set aside by this Hon'ble Tribunal.

2. That the CIT(A) failed to appreciate that the payments received by the Appellant do not qualify as 'royalty' under the India-Australia Double Taxation Avoidance Agreement (`the DTAA').

3. That the CIT(A) erred in failing to appreciate that notwithstanding the retrospective amendment made to section 9(1)(vi) of the Act vide the Finance Act, 2012, the definition of 'royalty' under the DTAA has not undergone any change.

4. That the CIT(A) erred in dismissing the Appellant's appeal by merely following the judgment gated 15 October 2011 passed by the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Limited, despite the said judgment being under challenge before the Hon'ble Supreme Court in C.A. No.
10109/2013.

5. That the CIT(A) erred in dismissing the Appellant's appeal by merely following the ruling dated February 2012 passed by the Authority for Advance Rulings in the Appellant's own case, despite the said ruling being under challenge before the Hon'ble Supreme Court in SLP(C) No. 1-8115/2012.

6. That the CIT(A) ought to have instead followed certain decisions delivered by the Hon'ble High Courts, the Authority for Advance Rulings and various benches of the Hon'ble Tribunal on the same issue that arises in the Appellant's case.

7. That the CIT(A) failed to appreciate that the Appellant sold software to distributors who, in turn, sold the software to end-users and that, therefore, there was no grant of any right in respect of the copyright in the software from the Appellant to its distributors in India.

8. That the CIT(A) failed to appreciate that the consideration received by the Appellant was not transfer of copyright in the software to the distributors/ end users but for sale of copyrighted software. 

9. That, in doing so, the CIT(A) overlooked the difference between the right to use a copyrighted article as against the transfer of copyright itself’ and that in the case of the Appellant, it is the former that has taken place.

10. That the CIT(A) failed to appreciate that access to software wherein a subject matter of copyright is embedded, without the right to exploit the copyright, does not amount to use or right to use the copyright in the copyrighted work.

11. That the CIT(A) failed to appreciate that since the payment received by the Appellant from its customers was not to be measured with reference to the productivity or use of the software, it could, therefore, not be construed as 'royalty'.

12. That, without prejudice and in any event, the CIT(A) erred in affirming the interest charged under Section 234A & 234B of the Act.

13. The Appellant prays that directions be given to grant all such relief arising from the above grounds and also all relief consequential thereto.

The Appellant desires leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds, at any time before or during the hearing of the Appeal.

The Appellant submits that the above grounds are independent of, and without prejudice, to one another.” 

To know more in details find the attachment file