TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether payment made for purchase of computer software for resale/distribution was royalty so as to attract tax deduction at source and disallowance under section 40(a)(i); (ii) Whether the disallowance arising from apportionment of salary expenditure between EOU and non-EOU units while computing deduction under section 10B required fresh verification; (iii) Whether the disallowance of employees' contribution to provident fund under section 36(1)(va) could be sustained in the second round of assessment.
Issue (i): Whether payment made for purchase of computer software for resale/distribution was royalty so as to attract tax deduction at source and disallowance under section 40(a)(i).
Analysis: The agreement showed that the assessee was only a reseller/distributor of a standard software product and had no right to exploit the copyright, modify the software, or use it for internal purposes. The payment was for a copyrighted article meant for resale in India and not for acquisition of any copyright. In view of the binding law on software distribution payments, such remittance was not royalty under the treaty or the Act, and no obligation to deduct tax at source arose.
Conclusion: The disallowance under section 40(a)(i) was deleted in favour of the assessee.
Issue (ii): Whether the disallowance arising from apportionment of salary expenditure between EOU and non-EOU units while computing deduction under section 10B required fresh verification.
Analysis: The assessee claimed to maintain separate books of account for the EOU and non-EOU units and had furnished segmental accounts and an auditor's certificate. The dispute related only to verification of salary allocation and whether the expenditure was actually recorded on a separate basis. The factual position had not been properly examined by the departmental authorities, so limited verification by the assessing officer was warranted.
Conclusion: The issue was restored to the assessing officer for limited verification and was allowed for statistical purposes.
Issue (iii): Whether the disallowance of employees' contribution to provident fund under section 36(1)(va) could be sustained in the second round of assessment.
Analysis: The disallowance had already been deleted in the first appellate round and had attained finality, since the revenue did not challenge that deletion. The assessing officer could not reintroduce the same addition while giving effect to the earlier remand order, as that travelled beyond the scope of the tribunal's directions.
Conclusion: The disallowance was unsustainable and was deleted in favour of the assessee.
Final Conclusion: The appeal succeeded on the software royalty issue and the provident fund disallowance, while the salary allocation issue was sent back only for limited factual verification, resulting in a partial allowance of the appeal.
Ratio Decidendi: Payment for acquisition of a copyrighted article for resale, without transfer of copyright rights, is not royalty and does not attract withholding tax; a matter already attained finality cannot be reopened beyond the scope of remand directions.
TaxTMI 
