ACCLERYS K K, NISHI SHIN PASHI, T.S. BUILDING, 11F, 3-3-1 NISHI SHIN PASHI, MINATO - KU Vs. SOMANATH S UKKALI, DDIT C 1(1), BANGALORE

JUDGEMENT

(1.) THE applicant is a company incorporated in Japan. It is part of Acclerys Group of companies. It is a subsidiary of Acclerys incorporated in USA. It has a liaison office in India. Liaison office acts as a coordinator. No sales are carried out through the liaison office. The applicant is a scientific informatics software and services company for life sciences, chemical and material research & development. The applicant enables the customers to accelerate their research process to enable them to rapidly discover new therapeutics materials and compounds and to introduce new efficiencies into the process that drive lower cost. The applicant has vast portfolio of copyrighted computer aided design modeling and stimulation offerings which assist customers in conducting scientific experiments in order to reduce the duration and cost of discovering and developing new drugs and materials. The company's platform can be used by customers to mine aggregate, analyze and report scientific data from disparate sources thereby better utilizing scientific data within their organization. The applicant is a subsidiary for dealing with products of the Acclerys group in Asia.

(2.) THE product of the applicant are in a software form and the right to use the application is given to customers by way of vendor licence key and through an independent reseller in India for which the customers make a one time payment. They also further pay update and / maintenance charges. To enable the sale of its products in India, the applicant had entered into an arrangement in India, with Apsara Innovations Pvt. Ltd. Apsara Innovations acts as a reseller of products. The reseller quotes it's own prices of products to the end users. After getting acceptance of the terms and prices by the customers, reseller places purchase orders on the applicant. Thereafter the license key is generated and delivered to the customer in India from overseas. The applications developed by the applicants are copyrighted material. The applicant authorizes the end users / customers to have benefit of the data, modules and applications contained in copyrighted products without any further right to deal with them independently. The license given to the customers is copyrighted material by the applicant and is provided to the customers on a non -exclusive and non -transferable basis. The independent resellers while remitting the consideration are deducting tax from all payments made under section 195(1) of the Income -tax Act, 1961 (Act) at 20% of the consideration.

(3.) THE Revenue in its submission has taken the stand that the both the sellers and the end -users have rights subject to the terms of their respective agreement with the applicant. Resellers have been given the right to make an offer for sale and the payments the resellers make for it is in the nature of royalty under the definition of royalty in the Act and in the Tax Convention. The right given to the end -user involves a right to use a copyright and hence the payment received can only be royalty. In essence the contention is that what is paid by the reseller to the applicant and by the end -user customer to the applicant is royalty as defined in the act and as defined in the DTAC between India and Japan. It does not appear to be necessary to further detail the submission made by the revenue since we find that the questions posed for our ruling have already been answered in three other rulings of this Authority.