TaxTMI 
TaxTMI 
2011 (8) TMI 330
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.... that the assessee has failed to deduct tax at source u/s 195 of the Act on the payments made by it to ING Zurich for purchase of shrink wrapped software from outside India. The AO considered the said payment as royalty under the Act as well as the DTAA between India and Switzerland. 2. Brief facts of the case are that the assessee who is engaged in the business of banking in India had made certain remittances to M/s ING Vysya Bank N.V.Switzerland during the relevant financial year. From the perusal of the CA certificate, the AO noticed that such remittances were made towards purchase of software license and also that the assessee has not deducted tax at source on the said remittance under the plea that the payments are made towar....
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....nd Named User Licenses and that the assessee has purchased the "shrink wrapped brand computer software" which is available off the shelf in the market, the AO held that as per the provisions of DTAA between India and Switzerland as well as the definition of "royalty" as per the Act, payment is in the nature of royalty and therefore, the assessee was required to deduct tax at source before making the remittances. Thus, the AO held that the assessee was an assessee in default u/s 201(1) of the Act and also levied interest u/s 201(1A) of the Act. 3. Aggrieved, the assessee preferred an appeal before the CIT(A) who, after considering the assessee's submissions as well as the assessing authorities finding, held that the assessee has ob....
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....to compulsorily deduct tax at source irrespective of whether the payment is liable for tax in India or not. Aggrieved, the assessee is in second appeal before us. 4. Shri S. Ananthan, the learned counsel for the assessee, while reiterating the submissions made by the assessee before the authorities below, submitted that the assessee only purchased a license to use the Oracle Database Software which is used by many others and mere sale of license is not the sale of right. He submitted that the assessee has only purchased the "shrink wrapped software" provided by Oracle Database and it is nothing but sale of software and no TDS is required to be made from such remittances. He submitted that the decision of the jurisdictional High Co....
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....her person. When the right of use of software is such limited one, that is only to use and operate, it cannot be said that there is any transfer of intellectual property. The licensed software has been developed by Oracle by use of intellectual property no doubt, but the product is only permitted to be used and operated and the assessee has no right to modify or transfer the said license. Thus, we are of the opinion, that there is no transfer of intellectual property. Now, the question to be considered is the nature of the payment whether it constitutes 'royalty' under the Indian Income Tax Act and the DTAA between India and Switzerland?. If it is in the nature of royalty then whether or not the royalty is taxable in India in the hands of t....
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....respect of a patent, invention, model, design, secret formula or process of trade mark or similar property; ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge experience or skill; iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB:) v) the transfer of all or any righ....
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.... consideration for the use of, Or the right to use, any copyright of a literary, artistic or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, any industrial commercial or scientific equipment or for information concerning industrial, commercial or scientific experience". 7.1 From a plain reading of the above Article also it is clear that any payment made for the use of or right to use of the properties mentioned there in would be royalty. We find that both the definitions are similar and encompass the payment....