ITAT rules that consideration received by assessee (a US entity) for providing access to internet and other networking facilities to an Indian entity, taxable as “Royalty” under Article 12(3) of India-US DTAA; Observes that subject payment was made for the use of embedded secret software (owned by assessee) for enabling the Indian customers to call residents of USA or vice-versa; Follows AAR ruling in case of ABC wherein payments made for access and retrieval of processed data embedded in global CPU was regarded as royalty; AAR had held that since payment was made for the use of customized/secret software, “The transaction would be related to a “scientific work” and would partake of the character of intellectual property”, hence taxable as royalty; Distinguishes assessee’s reliance on Delhi HC ruling in Asia Satellite Tele. Co. Ltd. as it dealt with use of Transponder, which is not a self-contained operating unit : Delhi ITAT
The ruling was delivered by ITAT bench of Smt. Diva Singh and Shri Inturi Rama Rao.
Mr. Ved Jain and Mr. Ashish Chadha, argued on behalf of assessee while Revenue was represented by Mr. Parwinder Kaur and Mr. Ravi Jain.