Sale of Software with no right to use copy right in software is business Income

Sale of Software with no right to use copy right in software is business Income

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows : 15. On going through the above clauses of the Distributor Agreement, it becomes immensely clear that the Distributors have been appointed by the assessee in India to serve a link with Resellers. The Distributors simply acquire the Symantec Products which they specifically sell to the Resellers. Trademarks, Trade Name and Copyrights in Symantec Products remain with the assessee and the Distributor cannot make any deviation in the Symantec products in any manner. Thus, it is overt that the assessee has appointed Distributors in India to facilitate sale of Symantec Products. The Symantec products sold as such to the Distributors do not confer any right on them to copy the software license. The Distributors, except for passing over the Symantec products as acquired by them from the assessee company, do not acquire any right or title in the intellectual property used in the software which always remains with the assessee. 16. The above discussion boils down that be it a case of sale to the Resellers or the Distributors, the assessee only transfers Symantec Products to them. It is not as if the Distributors or the Resellers acquire any right from the assessee to copy the software and then exploit it commercially. Their transactions are confined to purchasing specific Symantec Products from the assessee and then eventually selling the same to the end customers in India. There is no qualitative difference between the direct sales made by the assessee to its customers in India, which have already passed the scrutiny by the Tribunal in assessee’s own case for earlier year and the sales made by the assessee through the Distributors or the Resellers. In both the sets of circumstances, it is only one-to-one sale of the Symantec Products by the assessee and at no stage the right to use the copyright in the software is licensed either to the Distributor or the Reseller. Thus, the decision taken by the Tribunal in the context of direct sales made by the assessee to end customers in India applies with full force insofar as the sales through Distributors and Resellers are concerned. That being the position, we hold that the income earned by the assessee from sale of software, either directly to the customers in India or through Distributors or Resellers constitutes its business income and not the Royalty income. As admittedly the assessee did not have any Permanent Establishment in India, such income will not magnetize Indian taxation. We, therefore, overturn the impugned order. 17. In the result, the appeal is allowed.