2015 (4) TMI 1273 - AT - Income Tax

Payments for Software Licenses Deemed Royalty, Upheld by Tribunal; TDS Required

The Tribunal upheld the CIT(A) order in the appeals against the assessments for AYs 2009-10, 2010-11 & 2011-12. The payments for software licenses ... TDS u/s 195 - royalty payment - expenditure on imported software - India- USA DTAA or India- Singapore DTAA - HELD THAT:- The issue before the Hon’ble jurisdictional High Court in case of M/s Wipro Ltd [2010 (8) TMI 1053 - KARNATAKA HIGH COURT] was regarding allowability of expenditure of imported software whether capital in nature or revenue. There was no issue before the Hon’ble High Court whether the said expenditure was in the nature of royalty and only a passing reference was made by the Hon’ble High Court that the Commissioner rightly pointed out that it is not a royalty. In any case, when the prior decision in case of CIT Vs M/s Synopsis International Ltd [2013 (2) TMI 448 - KARNATAKA HIGH COURT] and in the latest decision in the case of M/s Samsung Electronics Co. Ltd. [2011 (10) TMI 195 - KARNATAKA HIGH COURT] on the issue of payment being royalty then the contention raised by the learned AR is devoid of any merits. The Tribunal in case of M/s Synopsis International Ltd. (Supra) for the assessment year : 2006-07, has decided an identical issue against the assessee Issues Involved:Appeals against CIT(A) orders u/s 201(1) and 201(1A) for AYs 2009-10, 2010-11 & 2011-12.Analysis:1. The assessee contended that payments for software licenses were not taxable as royalty under IT Act or DTAA with USA/Singapore. AO held payments as royalty, confirmed by CIT(A) citing precedents.2. Assessee engaged in software distribution, claimed payments to non-resident vendors were for copyright articles, not taxable in India. High Court judgments differed; assessee relied on Wipro Ltd case.3. Tribunal noted High Court decisions against assessee, binding on Tribunal. Synopsis International Ltd case upheld royalty classification for software payments.4. Tribunal upheld CIT(A) order, dismissing assessee's appeals. Payment for software licenses considered royalty, necessitating TDS under sec. 195.This detailed analysis covers the issues raised in the appeals, the arguments presented, and the Tribunal's decision based on relevant legal precedents and interpretations of royalty payments for software licenses under the IT Act and DTAA.