TaxTMI 
TaxTMI 
2010 (4) TMI 877
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....cal design solution in various countries. The shrink-wrap application software developed and sold by assessee is called 'Solid works 2003' which is used for 3D modeling. The software creates 3D models either from scratch or from existing 2D data. The designed data prepared by Solidworks 2003 software provides data which is 100 per cent editable. The software is provided in a packed form to the customers in India alongwith and pursuant to an end user license agreement (EULA). The agreement is not physically signed but built in as part of the installation process. The license agreement pops up on computer screen and must be accepted by, the user before the user can operate the software. The software provided to the user is a single user license whereby the software can be loaded in one computer or can be used many times (called multiple user license) which can be loaded on several computers. Solidwork owns and will retain all copyright, trade mark, trade secrete and other proprietary rights. The end user is not permitted to make any modification or make works derivative of the software and user is not entitle to reverse engineer, decompile, disassemble or otherwise discover the sourc....
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....4. Being aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us. 5. Ground No. 1 and 2 read as under :- "(1)On the facts and in the circumstances of the case and in law, learned CIT(A) erred in holding that the Assessing Officer has wrongly held that the amount of Rs. 4,13,94,748 received by the assessee for supply of software is in the nature of 'Royalty' which is liable for taxation in India. (2)On the facts and in the circumstances of the case and in law, learned CIT(A) failed to appreciate that the payment for obtaining Computer Software is in the nature of 'Royalty' and the same is liable for taxation in India within the meaning of Article 12(3) of the Indo-US DTAA." 6. At the time of hearing the ld. DR submits that for the reasons as mentioned in the assessment order, the ld. C1T(A) was not justified in holding that the amount received by the assessee for supply of software does not amount to royalty within the meaning of Article 12(3) of DTAA. He, therefore, submits that the order passed by the Assessing Officer be restored. 7. On the other hand, the ld. Counsel for the assessee, at the outset, submits that the impugned issue is fully covered in fav....
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....nated task. The copyright in that programme may remain with the originator of the programme. But the moment, copies and made and marketed, it becomes goods, which are susceptible to sale tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (In case of painting) or computer discs or cassettes, and marketed would become 'good'. We see no different between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media i.e., the paper or cassette or disc or CD. Thus, a transaction of sale of computer software is clearly a sale of goods within the meaning of the term as defined in the said Act." 8. Thus computer software when it is put on to a media and sold has ....
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.... ld. CIT(A) in deleting the addition made by the Assessing Officer, The grounds taken by the revenue are, therefore, rejected. 9. Ground No. 3 reads as under :- "On the frets and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that since the taxes are to be deducted at source, assessee is not liable to pay interest under section 234B of the Income-tax Act." 10. The ld. DR supports the order of the Assessing Officer. 11. On the other hand, the ld. Counsel for the assessee submits that this issue is also covered in favour of the assessee by the order of the Tribunal, supra. 12. Having carefully heard the submissions of the rival parties and perusing the material available on record, we find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee being a non-resident, its entire income arising in India is subject to deduction of tax at source in terms of section 195 of the Act. The Tribunal in the assessee's own case for assessment year 2003-04 has held vide para-10 of its order dated 15-12-2009 as under :- "10. The assessee being a non-resident. Entire income arising in India is subject to deduction of tax at source....