Payments for software licenses do not constitute taxable royalty in India under the Income Tax Act and the India-UK Tax Treaty due to lack of copyright transfer.

JUDGMENT

Navin Chawla, J.

1. These petition(s) challenge the Rulings/Orders both dated 10.08.2016 of the Authority for Advance Rulings (Income Tax), New Delhi (hereinafter referred to as the 'AAR') in the Application(s), being AAR No. 1043 of 2011; AAR No. 1408 of 2012; and AAR No. 1409 of 2012.

2. The Application, being AAR No. 1043 of 2011, was filed by EY Global Services Ltd. (formally known as EYGBS Ltd). The Application(s), being AAR No. 1408 of 2012 and 1409 of 2012, were filed by M/s EYME Technologies Private Limited and EYGBS (India) Private Limited, respectively. As recorded in the Impugned Ruling dated 10.08.2016, M/s EYME Technologies Private Limited has been amalgamated with EYGBS (India) Private Limited with effect from 01.04.2016 and therefore, at the request of EYGBS (India) Private Limited, a common order was passed in the two references. The same has been challenged by EYGBS (India) Private Limited before us by way of W.P. (C) 12003 of 2016.

3. In the Application(s), being AAR No. 1408 of 2012 and AAR No. 1409 of 2012, the learned AAR has followed its Ruling in AAR No. 1403 of 2011 and therefore, reference in the present judgment will be made to the facts from the writ petition, being W.P.(C) 11957 of 2016, which arises out of the said Impugned Ruling.

4. The learned AAR in its Impugned Ruling dated 10.08.2016 records that the EY Global Services Ltd. (EYGSL) UK [hereinafter referred to as the 'EYGSL (UK)'] is a limited liability company engaged in providing technology and other support services and software licences to member firms of the EY network in various countries all over the world. All member firms, including EYGSL (UK), use the brand Ernst & Young (EY). The Petitioner - EYGSL (UK) has entered into contracts with various third-party vendors for the procurement of various software. It has also entered into a contract with EY member firms to provide support services and/or deliverables.

5. The EYGBS (India) Private Limited [hereinafter referred to as the 'EYGBS (India)'] is an Indian company engaged in providing back-office support and data processing services. It has entered into an agreement with the EYGSL (UK) whereby it receives 'Right to benefit from the Deliverables and/or Services' from EYGSL (UK). The Impugned Ruling notes the specific services mentioned in the Services Schedule annexed to the Memorandum of Understanding (hereinafter referred to as the 'MOU'), which are rendered by EYGSL (UK) under the Service Agreement and the MOU executed between itself and the EYGBS (India). The same is quoted herein below:

"4. The specific services mentioned in the services schedule annexed to the MOU, which are rendered by the Applicant under the service agreement and the Memorandum of Understanding between the Applicant and EYGBS India are as follows:

1. Common standards and policies