Enea Software Inc. Vs DCIT (ITAT Delhi)
1. Software License Fee Not Royalty in India: Reason Is Copyrighted Article, Not Copyright Transfer
Description: The ITAT Delhi ruled that the fee received by a US company for licensing software was not taxable as royalty under the India-US DTAA. Following the Supreme Court precedent, the Tribunal held the transaction involved only the use of a copyrighted article, not the transfer of copyright rights.
2. US Company Income Not Taxable: Reason Is Absence of PE and Non-FTS Support Services
Description: The Tribunal deleted an addition of Rs.4.96 crore, confirming the US company’s income from software licensing and support services was non-taxable business profits under Article 7. The ruling affirmed that support services did not satisfy the “make available” test to qualify as Fees for Technical Services (FTS).
3. Support Services Not FTS Under DTAA: Reason Is Failure of Make Available Test
Description: ITAT held that the support and maintenance charges linked to the software license were not taxable as Fees for Included Services (FIS) because the services did not ‘make available’ technical knowledge to the Indian client. The decision relies on the principle that the client must be able to apply the technology on its own afterward.
