Case Details:

Autodesk Asia Pte Limited vs. DCIT

Appeal No.:

IT (IT) No. 3234/Bang/2018

Order pronounced by:

ITAT Bangalore

Date of order:

12-07-2021

In favour of:

Assessee

Assessment Year:

2015-16

The assessee is a Singapore based company, a subsidiary of Autodesk US and the headquarters for Asia-Pacific (APAC) region. It is engaged in the business of manufacturing, designing and supporting computer software and related Autodesk products in the APAC region. It performs or manages activities related to Autodesk’s products and services including R&D, localization, manufacturing, order processing and distribution operations and sale & marketing activities.

It licenses the right to Autodesk US’s core product software technology from the parent company and manufactures and sells the product in the Asia-Pacific region. The assessee company sold software licenses along with associated hardware to Indian customers and in connection with the same also provided certain ancillary services. The AO treated this income as ‘Royalty’ after the directions from the DRP.

This issue is squarely covered by the judgement of Hon’ble Supreme Court in the case of Engineering Analysis Centre for Excellence Private Limited vs. CIT & Another – AIR 2021 SC 124/ 432 ITR 471 (SC). The Apex Court in this case has held as follows:

• The “licence” that is granted by “EULA” is not a licence in terms of Section 30 of the Copyright Act, which transfers an interest in all or any of the rights but is a “licence” which imposes restrictions or conditions for the use of computer software. The EULAs in respect of computer software do not grant right to reproduce the computer software to distributor or the end-user.
• The sale of computer programme embedded in a physical object is a sale of goods as declared by this court in Tata Consultancy Services vs. State of A.P. 2005(1) SCC 308.
• Referring definition of royalty in Article 12 of DTAAs vis-à-vis section 9(1)(vi) of the Income Tax Act, it is clear that distribution agreement/ EULAs for software do not create any interest or right in the distributor or end-user, which would amount to the use of or right to use any copyright. Thus, the provisions as contained in section 9(1)(vi) along with explanations 2 and 4 thereof, not being more beneficial to the assessee, have no application in the fact of these cases.