Case Law Details
EY Global Services Limited Vs ACIT (Delhi High Court)
Conclusion: Payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), did not amount to royalty liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA as the same did not create any right to transfer the copyright in the software.
Held: In the present case, the EYGSL (UK) procured the computer software from different vendors and provides the same to its member firms. The purpose was to obtain a licence from the third-party vendors for all its entities under common control and create a standard facility to be accessed and used by all entities and in lieu of that, it received consideration based on certain parameters. Revenue contended that this was nothing but commercial exploitation of standard facilities created. The licence fee paid by the EYGSL (UK) for the software was with respect to the number of users. The computer programme was a „literary work‟ under the terms of Article 13(3) of the India-UK DTAA and payments for the use or right to use such copyright of the literary work would constitute „royalty‟. It was held that the EYGBS (India), in terms of the Service Agreement and the MOU, merely received the right to use the software procured by the EYGSL (UK) from third-party vendors. The consideration paid for the use of the same therefore, could not be termed as „royalty‟ as held by the Supreme Court in Engineering Analysis Centre. In determining the same, the rights acquired by the EYGSL (UK) from the third-party software vendors were not relevant. What was relevant was the Agreement between the EYGSL (UK) and the EYGBS (India). As the same did not create any right to transfer the copyright in the software, the same would not fall within the ambit of the term „royalty‟ as held by the Supreme Court in Engineering Analysis Centre . Thus, payment received by EYGSL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EYGBS (India), did not amount to „royalty‟ liable to be taxed in India under the provisions of the Income Tax Act, 1961 and the India-UK DTAA.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. These petition(s) challenge the Rulings/Orders both dated 10.08.2016 of the Authority for Advance Rulings (Income Tax), New Delhi (hereinafter referred to as the „AAR‟) in the Application(s), being AAR No. 1043 of 2011; AAR No. 1408 of 2012; and AAR No. 1409 of 2012.
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