TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 211
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....lding that the payment made by assessee to the foreign company not being in the nature of 'royalty', there is no requirement for deduction of tax at source u/s. 195 of the Income Tax Act [Act] and consequentially deleting the demand raised u/s. 201(1) and 201(1A) of the Act. 3. Briefly, the facts are the assessee an Indian company is basically engaged in the business of trading of software. On verification of record, the AO noticed that assessee has made payment of US $ 88,304 (Rs. 1,02,34,981/-) to a foreign company namely M/s. Altiris Singapore Pte. Ltd., (Altiris) without deduction of tax at source as required u/s. 195 of the Act. When the AO called upon the assessee to explain the reason for not deducting tax at source, the ass....
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....ion for the right to sale/distribute was paid by assessee to the said foreign company on the basis of the number of copies of the computer software/programme or number of such licenses or the duration of such licenses, it amounts to right to use the copyright. Hence, is in the nature of 'royalty'. The AO observed as the payment by way of 'royalty' to a non-resident in India is taxable under the Income Tax Act, the quantum of such tax has to be determined as per the provisions of the DTAA between Indian and Singapore. On the basis of the above reasoning, the AO proceeded to compute the tax and interest u/s. 201(1) and 201(1A) for assessee's default in deducting tax u/s. 195 on the payments made to Altiris at Rs. 11,37,220....
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....Altiris) does not provide the assessee or the end user any right to make copies or to reproduce the software. The assessee or the end users do not derive any value from the actual efforts put in by the developer. The assessee under the terms of the agreement is only allowed to sell as many number of software copies as are imported from the foreign company. What is being sold by the assessee to the end users is the copyrighted article. The copyright itself is not being sold or being allowed to be used for making any profit. Thus, on the aforesaid consideration, Ld.CIT(A) held that as the payment made by the assessee does not fall within the purview of 'royalty' as defined u/s. 9(1)(vi) of the Act, there is no need to deduct tax u/s. ....
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....ecisions: i) 94 ITD 91 Samsung Electronics Company Ltd., Vs. ITO (ITAT, Bangalore Bench); ii) 95 ITD 269 Motorola Inc. Vs. DCIT (ITAT, Delhi Special Bench); iii) 43 SOT 506 DDIT (International Taxation) Vs. Reliance Industries Ltd., (ITAT, Mumbai Bench); iv) 271 ITR 401 Tata Consultancy Services Vs. Sate of Andhra Pradesh (Supreme Court); and v) Decision of the ITAT, Hyderabad in the case of ADIT Vs. M/s. Bartronics India Ltd. 7. We have considered the submissions of the parties and perused the materials on record. We have carefully applied our mind to the decisions relied upon by the parties before us. As can be seen, the AO has treated the payment made by the assessee to Altiris as 'royalty' on the reasoning that as the asse....
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....he foreign company i.e., M/s. Altiris as a whole and more specifically Clause-2, 6, 10 and 11 of said agreement it is very much clear that the assessee has been appointed as a non-exclusive distributer/re-seller of the software products of the foreign company within the territory of India. The role of the assessee, to put it simply, is to purchase the software products from Altiris and sell it to customers in India. Therefore, the end user of the software products procured/obtained from the foreign company is not the assessee but the customers in India, to whom the assessee has sold the products. It is further evident from the facts on record, the nature of activity of the assessee under the registered re-seller agreement is to book orders ....
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....missed. ITA No. 1964/HYD/2011 (AY. 2008-09) & ITA No. 837/HYD/2013 (AY. 2009-10): 8. These appeals by the department are against the decision of Ld.CIT(A) in deleting the additions made by the AO on account of disallowance made u/s. 40(a)(i) of the Act for alleged non-deduction of tax at source u/s. 195 of the Act on payments made to M/s. Altiris for the AYs. 2008-09 and 2009-10. Facts in these appeals are more or less identical, except the fact that in AY. 2009-10, AO has not passed any order u/s. 201(1) of the Act declaring the assessee as an assessee in default. Be that as it may, as elaborately discussed in appeal No. 1874/Hyd/2011, in the earlier part of the order, the AO being of the view that the amounts paid by the assessee to M/....