Document Fragment View

Matching Fragments

The relevant clause of EULA is as under:

"The following terms and conditions apply to any use by you of any services provided by SAIC OIMT (the "SAIC OIMT Services"). The services are deemed to be provided by SAIC Overseas Intelligent Mobility Company Limited and You should not use the SAIC OIMT Services if you cannot agree to the below.
GRANT OF LICENSE: The SAIC OIMT Services are provided to you on a non-exclusive basis and you may only use the SAIC OIMT Services for your personal use and solely in combination with the hardware device which is incorporated into your vehicle. The license granted is non-transferable. If any software is provided as part of the SAIC OIMT Services, you are only entitled to use the binary form of such software and have no right to receive the source code. If upgrades, updates or supplements to the SAIC OIMT Services are obtained or made available to you, the use of such upgrades, updates or supplements are subject to the foregoing unless other terms accompany such upgrades, updates or supplements in which case those terms apply. All other rights not specifically granted under this paragraph are reserved by SAIC OIMT."

11.4 From the perusal of the License Agreement, it can be inferred that the objective of the agreement is to provide the Software which is a standard/off the shelf software supplied by the assessee to MG India for which the impugned payments are made by MG India. This is also evidenced by a declaration/certificate filed by the assessee wherein it has been specifically certified that the assessee supplies off the shelf software which gets delivered to hardware supplier and comes as a part of hardware without there being any element of provision of services by the assessee to MG India. From the relevant clauses of the License Agreement extracted above, it can be seen that the assessee has granted a non-transferable, non-exclusive, non-assignable license to incorporate the Software into the vehicles manufactured/sold by MG India to the end customers; no rights have been provided to make copies of software products or to modify, merge or combine with other software; no right to change the object code from source code and make any derivative products from that have been provided and the technical documentation for the software remained the property of the assessee and the assessee is responsible for any claims of patent infringement and thus there is no transfer of intellectual property rights. All intellectual property rights in the licensed products shall belong to the assessee and its licensors only. MG India is required to get the terms of the legally binding EULA contained in Exhibit B to the License Agreement, agreed by its customer before allowing use of the Licensed Products. The Ld. AO has alleged that the supply of software is not undertaken between the assessee and MG India for the reason that EULA is signed with the end customer instead of MG India. In our considered view, the allegation made by the AO has no foot to stand. MG India merely purchases the licensed software (Software) which are embedded in the head unit and fitted into cars for end use by the buyer of the car. In such cases, EULA is signed with the end user to restrict access to rights in the license. The end user signs EULA for use of the licensed software and has no right to copy (except as permitted by the licensed and the Usages Rules), reverse engineer, disassembled, attempt to derive the source code of, modify or create derivative works of the licensed software, any updates or any part thereof (as accepted and permitted by EULA). From the relevant clause of EULA extracted above, it is amply clear that the end user has limited right to use the application quite akin to use of licensed software. MG India merely purchases the Software and acts as a reseller and it is for this reason that it is not a party to EULA. This would not in our view characterize the impugned receipts from supply of Software as royalty income.

alludes to the concept of "know-how" which is defined to mean "undivulged technical knowledge, information, experience or technique that is necessary for the industrial reproduction of a product or process". "...know-how represents what a manufacturer cannot know from mere examination of the product and mere knowledge of the progress of technique. The information concerning industrial, commercial or scientific experience should have a perpetual or extended use." From the factual and legal scenario and considering the relevant clauses of the License Agreement which specifically provides for supply of software license only, it can be gathered that the assessee has only supplied a standard/off the shelf software to MG India and the assessee has not given any "know-how" to MG India from which MG India could reproduce the same for its perpetual use as MGI India has to purchase licenses equal to number of cars manufactured by it. It is only the use of Software that is provided on license basis while the source code/algorithm always remains with the assessee only. No adverse material has been brought on record by the Revenue to controvert the above factual and legal position. Further, in our considered opinion, the assessee's contentions finds due support from the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt. Ltd. (supra) wherein the Hon'ble Court held that the payer who gets non-