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of <h1>Court rules software purchase payments as Royalty under tax laws</h1> <h3>Commissioner of Income-tax, International Taxation Versus PSI. Data System Ltd.</h3> Commissioner of Income-tax, International Taxation Versus PSI. Data System Ltd. - TMI Issues:1. Whether the Tribunal correctly held that the assessee is not liable to deduct TDS for payments made for software purchase.2. Whether the Tribunal correctly held that the payment for software purchase cannot be treated as Royalty.3. Whether the Tribunal should have determined if foreign parties are chargeable to tax.Analysis:Issue 1:The appeal by the revenue questioned whether the assessee should deduct TDS for payments made for purchasing software, contending that it should be considered income liable to tax in India as Royalty or Scientific Work under section 9 of the Act and relevant treaties. The revenue argued that the judgment in the case of CIT v. Samsung Electronics Co. Ltd. covers the questions raised and the amendment to Section 9 of the Act by Finance Act, 2012, supports their position. The court, after considering the arguments, answered the question in the negative and in favor of the revenue, allowing the appeal and setting aside the Tribunal's order.Issue 2:The second issue revolved around whether the payment for software purchase could be treated as Royalty as per Double Taxation Avoidance Agreements and Treaties, considering that the assessee purchased only the right to use the copyright, not the entire copyright itself. The revenue argued that the amendment to Section 9 of the Act by Finance Act, 2012, clarified the situation and supported their stance. The court, in line with the revenue's arguments, answered the question in the negative against the assessee, allowing the appeal and restoring the assessment order.Issue 3:The final issue raised was whether the Tribunal should have determined if foreign parties are chargeable to tax, and if the assessee was obligated to deduct tax as per the Apex Court's decision. The court did not delve into this aspect extensively but answered the questions in the negative and in favor of the revenue, ultimately allowing the appeal and setting aside the Tribunal's order.
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