Software payments to non-residents were held subject to tax deduction at source, with section 201 consequences for non-deduction.

Payments for software purchased from non-residents were treated as exigible to tax deduction at source as royalty or income chargeable to tax in India, applying the court's earlier binding reasoning under section 9 of the Income-tax Act, 1961 and the relevant treaty provisions. On that basis, the assessee could not avoid liability under sections 195 and 201 without obtaining a certificate, and failure to deduct tax attracted the consequences under sections 201(1) and 201(1A). The questions of law were answered in favour of the Revenue, and the Tribunal's order was set aside.

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Issues: Whether payments made for purchase of software from non-residents were liable to tax deduction at source as royalty or income chargeable to tax in India, and whether the assessee could avoid liability under sections 195 and 201 of the Income-tax Act, 1961 without obtaining a certificate.

Analysis: The Court followed its earlier decision in connected matters and applied the same reasoning to hold that the amounts paid for software were exigible to tax at source. It treated the question of chargeability and the characterization of the payment under section 9 of the Income-tax Act, 1961, read with the relevant treaty provisions, as having been answered against the assessee in the earlier binding decision. On that basis, the failure to deduct tax attracted the consequences under section 201(1) and section 201(1A) of the Income-tax Act, 1961.

Conclusion: The questions of law were answered in favour of the Revenue and against the assessee, and the Tribunal's order was set aside.

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