By TIOL News Service

MUMBAI, NOV 05, 2015: THE appellant is engaged in Software Development and Consultancy Services and were issued a SCNon 7/1/2009 proposing to levy tax on the royalty paid by them to M/s. Unisys Corporation, USA under the category of "Intellectual Property Right Services".

Intellectual Property Service is defined under Section 65(55b) to mean (a) transferring (temporarily) or (b) permitting the use or enjoyment of, any intellectual property right. And Intellectual Property Right as defined under Section 65 (55a) means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright.

Lower authorities confirmed the demand of service tax and imposed penalties.

After considering the submissions, the CESTAT observed -

++ We find no clue at all in the records as to which type of Intellectual Property Right is being assigned to the "Technical know how" received by the appellant. It is obvious from the definition of Intellectual Property Right that the right has to be a specific Right under a specific Law. Examples are given under the definition such as the Trade Mark which is a right provided under "Trade Marks Act". Similarly the right mentioned as 'design' in the definition is a right under the "Design Act". Therefore we find that the technical know-how received by the appellant and the royalty payment made by the appellant to Unisys is nowhere established to result from the use of any Intellectual Property Right.

++ Intellectual Property Right should be a right under the Indian Law. Intellectual Property Right not covered by the Indian laws would not be covered under taxable service in the category of Intellectual Property Right Services. We are fortified in our view by Board Circular F.No. 80/10/2004-ST dated 17/9/2004.

++ We are fortified in our view by the Tribunal decision in the case of Rochem Separation Systems (India) P. Ltd. Vs. Commr. of S.T. Mumbai-I - 2015-TIOL-120-CESTAT-MUM in which it was held that mere transfer of technology is certainly not related to service provided in relation to Intellectual Property Right service which involves the transfer or use of any Intellectual Property Rights.

The order passed by Commissioner(A) was set aside and the appeal was allowed.

(See 2015-TIOL-2370-CESTAT-MUM)