TaxTMI 
TaxTMI 
2015 (9) TMI 710
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....er of Income-tax (Appeals) in confirming the disallowance of Rs. 23,43,598 made by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961. 3. We heard the parties and perused the relevant materials on record. The facts relating to the said disallowance are that the Assessing Officer noticed that the assessee has paid a sum of Rs. 23.43 lakhs as licence fee in respect of two softwares named MBIL Star Diagnostics and MBIL E-Dealer. The assessee is a dealer of Mercedes-Benz cars and the abovesaid two softwares have been supplied by M/s. Mercedes-Benz India P. Ltd. for the non-exclusive use by the assessee. Since the assessee did not deduct tax at source from the above said payments under section 194J of the Act, the Asses....
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....at source under section 194J of the Act from the service charges paid by it. The learned authorised representative further placed his reliance on the decision of the hon'ble Delhi High Court in the case of DIT v. Infrasoft Ltd. [2013] 96 DTR 113 (Delhi) wherein it was held that the licence granted for use or right to use of any copyrighted article will not amount to transfer of any rights over the same and hence, it cannot be considered as royalty. 4.1. The learned Departmental representative however submitted that the assessee has made the payment for use of software and hence it will squarely fall under the definition of royalty as given under Explanation 2 to section 9(1)(vi) of the Income-tax Act. The learned Departmental represe....
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....e mark or similar property. Under Explanation 4, a reference is made about computer software and for the sake of convenience ; we extract Explanation 4 as under : "Explanation 4.-For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred." A combined reading of definition of "royalty" given in Explanation 2, Explanation 3 and Explanation 4 would, in our view, show that the Legislature has intended to include a computer software under "patent or inv....
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....ive effect. (a) Sonata Information Technology Ltd. v. Deputy CIT (LTU) [2012] 19 ITR (Trib) 408 (Mumbai) ; (b) Infotech Enterprises Ltd. v. Addl. CIT [2014] 30 ITR (Trib) 542 (Hyd) ; and (c) Channel Guide India Ltd. v. Asst. CIT [2012] 20 ITR (Trib) 438 (Mumbai). 8. In the case of Infrasoft Ltd. (supra), the hon'ble Delhi High Court has held that the price paid for a copyrighted article represents purchase price of an article and cannot be considered as royalty. Thus, it is seen that the view taken by the assessee gets support from the decision of the hon'ble Delhi High Court, referred to above, till Explanation 4 was inserted in section 9(1)(vi) of the Act by Finance Act, 2012 with retrospective effect....
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.... of Asia Satellite Telecommunications Co. Ltd.v. DIT [2011] 332 ITR 340 (Delhi). Though Explanation 6 to section 9(1)(vi) inserted by the Finance Act, 2012 is clarificatory in nature, yet in view of the fact that the view entertained by the asses see gets support from the decision of the Delhi High Court, referred above, we are of the view that the assessee cannot be held to be liable to deduct tax at source from the pay channel charges. Hence, we are of the view that the Assessing Officer was not justified in disallowing the claim of pay channel charges by invoking the provisions of section 40(a)(ia) of the Act. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Of....