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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: SH. N. K. BILLAIYA & MS. ASTHA CHANDRA
This appeal filed by the assessee is preferred against the order dated 26.10.2012 framed u/s. 143 (3) r.w.s. 144 C(13) of the Act. 2. The grievance of the assessee read as under :-
Briefly stated the facts of the case are that the appellant is a software company engaged in the business of research, creation of software products and selling its products through its subsidiaries across the globe. The products were in the category of middleware products used to provide the infrastructure base for applications to elicit information from various database.
In terms of the agreement, BEA systems India, ordered and distributed the software products strictly against an end user order in whose name the licenses were issued by appellant. Hence, the recipient of right to use is the end customer and not BEA Systems India. It may be pertinent to note that the software procured is merely a product in the hands of BEA Systems India as it has no right to use the product being a distributor.
BEA India was the one making payments to BEA Systems and not the end user.
The AO was of the firm belief that the payment received by the assessee is for right in a copy right and accordingly treated the same as royalty under Article 12 of DTAA.
Objections were raised before the DRP. The DRP after considering the objections came to the conclusion that the Tribunal in the case of the assessee for A.Y. 2007-08 held that the payments constitute royalty and confirmed the view of the AO. The DRP further observed that for the year under consideration there was no change in the issues involved and followed the decision of the DRP in A.Y.2007-08 and confirmed the view of the AO. In A.Y.2008-09 the quarrel travelled upto the Hon’ble High Court of Karnataka and the Hon’ble High Court in C/W ITA No.269/2012 decided the quarrel in favour of the revenue. The relevant findings of the judgment of the Hon’ble Karnataka High Court (supra) read as under :-
The quarrel relating to the impugned issue as now been well settled by the judgment of the Hon’ble Supreme court in the case of Engineering Analysis Centre of Excellence Private Limited 432 ITR 471 wherein the Hon’ble Supreme Court has also considered the Judgment of Hon’ble Karnataka High Court. The relevant finding of the Hon’ble Supreme Court read as under :-