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Excellence Private Limited vs. CIT
(Supreme Court) Go

Posted on March 2, 2021 by editor — 1 Comment ↓

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 COURT: Supreme Court

CORAM: B. R. Gavai J, Hemant Gupta J, Rohinton Fali Nariman J.

SECTION(S): 9(1)(vi), Article 12

GENRE: Domestic Tax, International Tax

CATCH WORDS: application software, royalty, software licensing

COUNSEL: Ajay Vohra, Arvind Datar, P.J. Pardiwalla

DATE: March 2, 2021 (Date of pronouncement)

DATE: March 2, 2021 (Date of publication)

AY: -

FILE: Click here to view full post with file download link

CITATION:

Taxability of sums received for supply of software as "royalty": Given the definition
of royalties contained in Article 12 of the DTAAs, 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 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 provisions contained in the Income Tax Act (section
itatonline.org
9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being 3.8K likes
more beneficial to the assessees, have no application in the facts of these cases

Given the definition of royalties contained in Article 12 of the DTAAs Like Page

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 Recent Posts
deduct tax at source, as the distribution agreements/EULAs in the facts of
Tata Communications Ltd vs. UOI
these cases do not create any interest or right in such distributors/end-users,
(Bombay High Court)
which would amount to the use of or right to use any copyright. The
Teleperformance Global Services
provisions contained in the Income Tax Act (section 9(1)(vi), along with
Private Limited vs. ACIT (Bombay
explanations 2 and 4 thereof), which deal with royalty, not being more
High Court)
beneficial to the assessees, have no application in the facts of these cases.
DCIT vs. Ozone India Ltd (ITAT
Our answer to the question posed before us, is that the amounts paid by
Ahmedabad)
resident Indian end-users/distributors to non-resident computer software
Maria Fernandes Cheryl vs. ITO
manufacturers/suppliers, as consideration for the resale/use of the computer
(ITAT Mumbai)
software through EULAs/distribution agreements, is not the payment of
Asset Reconstruction Company
royalty for the use of copyright in the computer software, and that the same
(India) Limited vs. Bishal Jaiswal
does not give rise to any income taxable in India, as a result of which the
(Supreme Court)
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
Recent Comments
T L JAIN on CIT vs. Jaipur Vidyut
Read more › Vitran Nigam Ltd (Rajasthan High
Court)
Shashi Bekal on Little Angels
Education Society vs. UOI (Bombay
High Court)
ACIT vs. Reliance Jio Infocomm Ltd N. Devanathan on Little Angels
Education Society vs. UOI (Bombay
(ITAT Mumbai) High Court)
Adv. I.S.Verma on Sajan Kumar Jain
Posted on November 30, 2019 by editor — No Comments ↓ vs. DCIT (ITAT Delhi)
मोरे shankar on In Re: Vijay Kurle
(Supreme Court)
 COURT: ITAT Mumbai

CORAM: Pramod Kumar (VP), Ravish Sood (JM)

SECTION(S): 9(1)(vi), Article 12, Article 3

GENRE: Domestic Tax, International Tax

CATCH Fees for technical services, India-Singapore DTAA, royalty, Static vs.
WORDS: Ambulatory interpretation of DTAAs, treaty override

COUNSEL: Sunil Moti Lala

DATE: November 15, 2019 (Date of pronouncement)

DATE: November 30, 2019 (Date of publication)

Archives
AY: 2018-19
April 2021 (8)
FILE: Click here to view full post with file download link
March 2021 (8)
CITATION: January 2021 (9)
December 2020 (4)
Static vs. Ambulatory interpretation of DTAAs: Entire law on whether the
November 2020 (2)
retrospective amendments to the definition of "royalty" in s. 9(1)(vi) of the Act can
October 2020 (2)
have bearing on the interpretation of the same term in the DTAAs explained with
September 2020 (3)
reference to the doctrine of "treaty override" and the Vienna Convention (Siemens
August 2020 (5)
AG 310 ITR 320 (Bom) explained)
July 2020 (9)
June 2020 (12)
That is a classic case of a subtle unilateral treaty override. While, in India,
May 2020 (9)
the expression ‘treaty override’ is often loosely used for the situations where
April 2020 (9)
the provisions of tax treaty prevails over any inconsistent provisions of
March 2020 (16)
domestic law, this approach seems to be at variance with the international
February 2020 (19)
practices wherein connotations of ‘treaty override’ refer to a situation in
January 2020 (10)
which domestic legislation of a treaty partner jurisdiction overrules the
December 2019 (10)
provisions of a single treaty or all treaties hitherto having had effect in that
November 2019 (13)
jurisdiction. That will be the end result of a domestic law amendment of an
October 2019 (22)
undefined treaty term, in departure from the current position, and import such
September 2019 (11)
amended meaning of that term, under article 3(2), in the treaty situations as
August 2019 (16)
well. Such an approach, on the first principles, is unsound inasmuch as it is
July 2019 (15)
well settled in law that the treaty partners ought to observe their treaties,
June 2019 (18)
including their tax treaties, in good faith. Article 26 of Vienna Convention on
May 2019 (9)
Law of Treaties provides that, “Pacta sunt servanda: Every treaty in force is
April 2019 (31)
binding on the parties to it and must be performed by them in good faith”.
March 2019 (21)
What it implies is that whatever be the provisions of the treaties, these
February 2019 (20)
provisions are to be given effect in good faith. Therefore, no matter how
January 2019 (12)
desirable or expedient it may be from the perspective of the tax
December 2018 (24)
administration, when a tax jurisdiction is allowed to amend the settled
November 2018 (25)
position with respect to a treaty provision, by an amendment in the domestic
October 2018 (27)
law and admittedly to nullify the judicial rulings, it cannot be treated as
September 2018 (28)
performance of treaties in good faith. That is, in effect, a unilateral treaty
August 2018 (36)
over-ride which is contrary to the scheme of Article 26 of Vienna Convention
July 2018 (29)
on Law of Treaties
June 2018 (27)
May 2018 (25)
Read more ›
April 2018 (27)
March 2018 (28)
February 2018 (12)
January 2018 (22)
December 2017 (24)
CIT vs. Reliance Infocomm Ltd November 2017 (18)

(Bombay High Court) October 2017 (16)

September 2017 (30)
August 2017 (18)
Posted on June 8, 2019 by editor — 1 Comment ↓
July 2017 (22)
June 2017 (18)
May 2017 (29)
April 2017 (21)
 COURT: Bombay High Court March 2017 (20)
February 2017 (16)
CORAM: Akil Kureshi J, M. S. Sanklecha J
January 2017 (32)
SECTION(S): 9(1)(vi) December 2016 (24)
November 2016 (15)
GENRE: International Tax
October 2016 (15)
CATCH WORDS: India-Netherlands DTAA, Retrospective amendment, royalty September 2016 (21)
August 2016 (25)
COUNSEL: J.D. Mistri
July 2016 (15)
DATE: February 5, 2019 (Date of pronouncement) June 2016 (13)
May 2016 (37)
DATE: June 8, 2019 (Date of publication)
April 2016 (45)
AY: - March 2016 (36)

FILE: Click here to view full post with file download link February 2016 (30)
January 2016 (20)
CITATION:
December 2015 (11)
S. 9(1)(vi) 'Royalty': The insertions of Explanations 5 & 6 to s. 9(1)(vi) by the Finance November 2015 (37)
Act 2015 w.r.e.f. 01.04.1976, even if declaratory and clarificatory of the law, will not October 2015 (31)
apply to the DTAAs. The DTAAs are a bilateral agreement between two Countries September 2015 (27)
and cannot be overridden by a unilateral legislative amendment by one Country August 2015 (35)
(New Skies Satellite BV 382 ITR 114 (Del) & Siemens AG 310 ITR 320 (Bom) July 2015 (43)
followed) June 2015 (29)
May 2015 (28)

India’s change in position to the OECD Commentary cannot be a fact that April 2015 (29)

influences the interpretation of the words defining royalty as they stand March 2015 (43)

today. The only manner in which such change in position can be relevant is if February 2015 (30)

such change is incorporated into the agreement itself and not otherwise. A January 2015 (38)

change in executive position cannot bring about a unilateral legislative December 2014 (43)

amendment into treaty concluded between two sovereign states. It is November 2014 (58)

fallacious to assume that any change made to domestic law to rectify a October 2014 (93)

situation of mistaken interpretation can spontaneously further their case in an September 2014 (14)

international treaty. August 2014 (22)

July 2014 (24)

Read more › June 2014 (24)

May 2014 (19)
April 2014 (20)
March 2014 (12)
February 2014 (40)

DCIT vs. Reliance Jio Infocomm Ltd January 2014 (17)

December 2013 (20)

(ITAT Mumbai) November 2013 (15)

October 2013 (12)

Posted on June 8, 2019 by editor — No Comments ↓ September 2013 (13)

August 2013 (13)
July 2013 (10)
June 2013 (12)
May 2013 (24)
April 2013 (27)
March 2013 (13)
February 2013 (15)
January 2013 (16)
December 2012 (17)
November 2012 (13)
October 2012 (14)
September 2012 (27)
August 2012 (33)
July 2012 (21)
June 2012 (17)
May 2012 (29)
April 2012 (35)
March 2012 (31)
February 2012 (24)
 COURT: ITAT Mumbai January 2012 (22)
December 2011 (19)
CORAM: M. Balganesh (AM), Ravish Sood (JM)
November 2011 (25)
SECTION(S): 9(1)(vi) October 2011 (13)
September 2011 (17)
GENRE: International Tax
August 2011 (13)
CATCH WORDS: royalty July 2011 (21)
June 2011 (22)
COUNSEL: Sunil Moti Lala
May 2011 (19)
DATE: May 10, 2019 (Date of pronouncement) April 2011 (23)
March 2011 (28)
DATE: June 8, 2019 (Date of publication)
February 2011 (23)
AY: 2016-17 January 2011 (21)

FILE: Click here to view full post with file download link December 2010 (23)
November 2010 (12)
CITATION:
October 2010 (17)
S. 9(1)(vi) Royalty: Payment for 'bandwith services' is not assessable as 'royalty' if September 2010 (10)
the assessee only has access to services and not to any equipment. The assessee August 2010 (11)
also did not have any access to any process which helped in providing of such July 2010 (14)
bandwith services. All infrastructure & process required for provision of bandwith June 2010 (10)
services was always used and under the control of the service provider and was May 2010 (16)
never given either to the assessee or to any other person availing the said services April 2010 (8)
March 2010 (11)

The assessee pursuant to the terms of the “agreement‟ had only received February 2010 (11)

standard facilities i.e bandwith services from RJIPL. In fact, as observed by January 2010 (12)

the CIT(A), the assessee only had an access to services and did not have December 2009 (14)

any access to any equipment deployed by RJIPL for providing the bandwith November 2009 (12)

services. Apart there from, the assessee also did not have any access to any October 2009 (9)

process which helped in providing of such bandwith services by RJIPL. As a September 2009 (11)

matter of fact, all infrastructure and process required for provision of August 2009 (14)

bandwith services was always used and under the control of RJIPL, and the July 2009 (13)

same was never given either to the assessee or to any other person availing June 2009 (2)

the said services May 2009 (7)

April 2009 (10)

Read more › March 2009 (14)

February 2009 (11)
January 2009 (17)
December 2008 (12)
November 2008 (11)

EPRSS Prepaid Recharge Services October 2008 (13)

September 2008 (22)

India P. Ltd vs. ITO (ITAT Pune) August 2008 (19)

July 2008 (9)

Posted on November 6, 2018 by editor — No Comments ↓ June 2008 (4)

May 2008 (9)
April 2008 (12)
March 2008 (9)
February 2008 (19)
January 2008 (13)
 COURT: ITAT Pune

CORAM: Anil Chaturvedi (AM), Sushma Chowla (JM)

SECTION(S): 9(1)(vi)

GENRE: Domestic Tax, International Tax

CATCH WORDS: Amazon Web Services (AWS), royalty, web hosting charges

COUNSEL: Kishore Phadke

DATE: October 24, 2018 (Date of pronouncement)

DATE: November 6, 2018 (Date of publication)

AY: 2011-12

FILE: Click here to view full post with file download link

CITATION:

S. 9(1)(vi) Royalty/ 40(a)(i): Law explained on whether payment of web hosting

charges to Amazon Web Services LLC (USA) (AWS) constitutes "royalty" under
Explanation 2 to s. 9(1)(vi) read with the India USA DTAA and whether there is any
obligation to deduct TDS thereon u/s 195

The aspect which needs to be seen is whether the assessee is paying

consideration for getting any right in respect of any property. The assessee
claims that it does not pay for such right but it only pays for the services. The
claim of assessee before us was that it was only using services provided by
Amazon and was not concerned with the rights in technology. The fees paid
by assessee was for use of technology and cannot be said to be for use of
royalty, which stands proved by the factum of charges being not fixed but
variable i.e. it varies with the use of technology driven services and also use
of such services does not give rise to any right in property of Amazon and
consequently, Explanation under section 9(1)(vi) of the Act is not attracted

Read more ›

Godaddy.com LLC vs. ACIT (ITAT

Delhi)
Posted on April 4, 2018 by editor — 2 Comments ↓
 COURT: ITAT Delhi

CORAM: G. D. Agrawal (P), Suchitra Kamble (JM)

SECTION(S): 9(1)(vi)

GENRE: International Tax

CATCH WORDS: domain registration fees, royalty

COUNSEL: S. P. Singh

DATE: April 3, 2018 (Date of pronouncement)

DATE: April 4, 2018 (Date of publication)

AY: 2013-14

FILE: Click here to view full post with file download link

CITATION:

S. 9(1)(vi) Royalty: Domain name is an intangible asset which is similar to

trademark. Consequently, income from services rendered in connection with such
domain name registration is assessable as "royalty" u/s 9(1)(vi) of the Income-tax
Act

It is now settled law that with the advent of modern technology particularly
that relating to cyberspace, domain names or Internet sites are entitled to
protection as a trade mark because they are more than a mere address. The
rendering of Internet services is also entitled to protection in the same way
as goods and services are, and trade mark law applies to activities on
Internet

Read more ›

CIT vs. NGC Networks (India) Pvt. Ltd

(Bombay High Court)
Posted on February 16, 2018 by editor — No Comments ↓
 COURT: Bombay High Court

CORAM: M. S. Sanklecha J, Riyaz I. Chagla J

SECTION(S): 40(a)(i), 9(1)(vi)

GENRE: Domestic Tax, International Tax

CATCH WORDS: royalty, TDS disallowance

COUNSEL: Divesh Chawla

DATE: January 29, 2018 (Date of pronouncement)

DATE: February 16, 2018 (Date of publication)

AY: 2009-10

FILE: Click here to view full post with file download link

CITATION:

S. 40(a)(i) TDS disallowance: A party cannot be called upon to perform an

impossible Act i.e. to comply with a provision not in force at the relevant time but
introduced later by retrospective amendment. S. 40(a)(i) disallowance can be made
only if the royalty falls under Explanation 2 to s. 9(1)(vi) but not if it falls under
Explanation 6 to s. 9(1)(vi)

The view taken by the Tribunal that a party cannot be called upon to perform
an impossible Act i.e. to comply with a provision not in force at the relevant
time but introduced later by retrospective amendment. This is in accord with
the view taken by this Court in CIT v/s. Cello Plast (2012) 209 Taxmann 617
– wherein this Court has applied the legal maxim lex non cogit ad
impossibilia (law does not compel a man to do what he cannot possibly
perform)

Read more ›

DDIT vs. Reliance Communication Ltd

(ITAT Mumbai)
Posted on January 4, 2018 by editor — No Comments ↓
 COURT: ITAT Mumbai

CORAM: C. N. Prasad (JM), R. C. Sharma (AM)

SECTION(S): 9(1)(vi), Article 12

GENRE: Domestic Tax, International Tax

CATCH WORDS: royalty, software licensing

COUNSEL: J.D. Mistri

DATE: January 3, 2018 (Date of pronouncement)

DATE: January 4, 2018 (Date of publication)

AY: -

FILE: Click here to view full post with file download link

CITATION:

Taxability of software payments as royalty: The fact that there is a conflict of

judicial opinion on whether payments for software are assessable as royalty or not
does not entitle the Dept to seek a reference to the Special Bench. The Tribunal has
to follow judicial discipline. Also, if a reference is made to the Special Bench it will
violate the principle in Vegetable Products 188 ITR 192 (SC) that if there are two
possible views, the view favourable to the assessee must be adopted

So far as Constitution of special Bench is concerned, a reference to

constitute a Special Bench flows from the members and not from the parties
to the case. Furthermore, such a reference can be made by the members
when they do not agree with the view taken by the earlier order of the
Tribunal. However, in the instant cases before us, it is not a situation, only
after hearing, the matter afresh by the division bench in terms of direction of
Hon’ble High Court dated 08.08.2017, the bench may decide the issue to
agree or disagree with the view already taken by the earlier bench.
Furthermore merely on the conflict view .of the decision of the High Court, a
reference cannot be made to constitute Special Bench. If the present
application of the Revenue is accepted, the process of reference to a Special
Bench / larger Bench would never reach an end. Reference to Special Bench
would continue to be moved by the parties upon every subsequent non-
jurisdictional High Court decision, thus, leading to a number of cases being
referred to constitute Special Bench. However, correct decision is to follow
the judicial hierarchy and maintain judicial discipline. Furthermore, if the
applications of the Revenue were to be allowed, it would lead to the violation
of the principle laid down by the Hon’ble Supreme Court in the case of CIT
Vs. Vegetable Products (1973) (188 ITR 192) (SC)

Read more ›

Google India Private Ltd vs. ACIT

(ITAT Bangalore)
Posted on October 28, 2017 by editor — 1 Comment ↓
 COURT: ITAT Bangalore

CORAM: Jason P. Boaz (AM), Laliet Kumar (JM)

SECTION(S): 195, 201, 9(1)(vi), Article 12

GENRE: Domestic Tax

CATCH WORDS: Business profits, Google Adwords, royalty

COUNSEL: Percy Pardiwala

DATE: October 23, 2017 (Date of pronouncement)

DATE: October 28, 2017 (Date of publication)

AY: 2007-08 to 2012-13

FILE: Click here to view full post with file download link

CITATION:

Royalty u/s 9(1)(vi) & Article 12: The Google Adwords advertisement module is not
merely an agreement to provide advertisement space but is an agreement for
facilitating the display and publishing of an advertisement to the targeted customer
using Google's patented algorithm, tools and software. Google Adwords uses data
regarding the age, gender, region, language, taste habits, food habits, etc of the
customer so as to maximize the impression and conversion to the ads of the
advertisers. Consequently, the payments to Google Ireland are taxable as "royalty"
and the assessee ought to have deducted TDS thereon u/s 195

If we look into the advertisement module of Adword program stated herein

above, then we will come to an irresistible conclusion that it is not merely an
agreement to provide the advertisement space but is an agreement for
facilitating the display and publishing of an advertisement to the targeted
customer. If we look into the submission made by the learned AR, it is clear
that the advertiser, selects some key words and on the basis of key words,
the advertisement is displayed on the website or along with the search result
as and when the customer selects the key words relatable to the
advertisement. The module as suggested does not merely work by providing
the space in the Google search engine, but it works only with the help of
various patented tools and software. As we have analyzed detailed
functioning of Adword program, it is clear that with the help of the search
tool/software / data base, the Google is able to identify the targeted
consumer/person as per the requirement of the advertiser

Read more ›

HITT Holland Institute of Traffic

Technology B.V. vs. DDIT (ITAT
Kolkata)
Posted on February 20, 2017 by editor — No Comments ↓
 COURT: ITAT Kolkata

CORAM: Dr. A. L. Saini (AM), N. V. Vasudevan (JM)

SECTION(S): 9(1)(vi), 9(1)(vii), Article 12, Article 5

GENRE: International Tax

CATCH Fees for technical services, make available, Permanent Establishment,

WORDS: royalty

COUNSEL: S. K. Agarwal

DATE: February 8, 2017 (Date of pronouncement)

DATE: February 20, 2017 (Date of publication)

AY: 2010-11

FILE: Click here to view full post with file download link

CITATION:

Entire law on Permanent Establishment, Force of Attraction principle, taxability of

software embedded in hardware as royalty, make available of technical services etc
explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are
attributable to PE or not or whether they are of the same kind of transactions
carried on by the PE or not, which is referred to as “Full Force of Attraction”
principle. As to which principle is applicable in a given case depends on the
clauses of the convention between two countries. Article 7(1) of the DTAA
between India and Netherlands provides for taxing profits of the enterprise in
the other state only to the extent they are attributable to the PE in the other
state, adopting “No Force of Attraction” principle

Read more ›

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