Case Law Details
M/s. Ansys Inc. Vs ACIT (ITAT Pune)
In present facts of the case, the assessee is a company registered in, and a tax resident of USA. A transaction was initiated between assesse and M/s. Honeywell Technology Solutions Lab Pvt. Ltd., wherein the assesse received Rs.2.42 crore as a consideration for sale of Software/License which was considered in the nature of Royalty chargeable to tax in India by the AO.
The assessee, contended that as per Article 12 of the DTAA, the amount received was not in the nature of Royalty but they are ‘Business Profits’ covered under article 7 of DTAA. The Hon’ble Tribunal relied upon the Judgment of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT (2021) 432 ITR 472 (SC), wherein it was observed that “Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the “licensed” computer software product over which the licensee has no exclusive rights, no copyright is parted with.”
On the basis of above, the Hon’ble tribunal held that the amount cannot be brought within the ambit of ‘Royalties’ under Article 12 of the DTAA.
Further, on the contention of ‘Business Profits’ it was held that as the assessee did not have a Permanent Establishment in India during the relevant year, the mandate of Article 7 cannot activate. Therefore, the receipt cannot be charged to tax in India as ‘Business profits’ either.
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