By K. B. Bhujle, Advocate
5 EY Global Services Ltd. vs. ACIT
[2022] 441 ITR 54 (Del)
Date of order: 9th December, 2021
S. 9 of ITA, 1961
Non-resident — Income deemed to accrue or arise in India — Royalty — Meaning of “royalty” — Transfer authorising transferee to use licensed software — No transfer of copyright — Amount received cannot be termed royaltyEYGBS was an Indian company that provided back-office support and data processing services. It entered into an agreement with the EYGSL (UK) whereby it received ‘right to benefit from the deliverables and/or services’ from the UK company. The Authority for Advance Rulings held that the amount received was assessable as royalty in India.
The assessee company filed a writ petition and challenged the ruling. The Delhi High Court allowed the writ petition and held as under:
“a) In Engg. Analysis Centre of Excellence P. Ltd. vs. CIT [2021] 432 ITR 471 (SC), the Supreme Court observed that the definition of royalty that is contained in Explanation 2 to section 9(1)(vi) of the Income-tax Act, 1961 would make it clear that there has to be a transfer of “all or any rights” which includes the grant of a licence in respect of any copyright in a literary work. The expression “including the granting of a licence” in clause (v) of Explanation 2 to section 9(1)(vi) of the Act, would necessarily mean a licence in which transfer is made of an interest in rights “in respect
