TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1742
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.... and disposed of by this consolidated order for the sake of convenience. 2. At the outset, the learned AR submitted that he does not want to press grounds raised relating to violation of priciples of natural justice in both the appeals. Hence ground No.2 in ITA No.362/Hyd/2011 and ground No.3 in ITA No. 1736/Hyd/2012 are dismissed as not pressed. 3. The only common issue in the present appeals of the assessee is with regard to the disallowance made u/s 40(a) (i) of the Act on alleged failure on the part of the assessee to deduct tax at source on the payment of royalty. 4. Since facts in both the appeals are identical, we will deal with the facts as taken from ITA No.362/Hyd/2011.Briefly stated facts are, the assessee is a private ....
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.... 40(a)(i) of the Act. Though the assessee objected to the proposed disallowance, the Assessing Officer primarily relying upon the finding of the CIT (A) in the appeal order passed for the assessment years 2004-05 and 2005-06 on identical issue, held that the amount paid is royalty, hence subject to TDS provisions u/s 195(1) of the Act. Since the assessee has not deducted any tax at source on such payments, the Assessing Officer disallowed the entire expenditure of Rs. 1,33,46,155/- and added the same to the income of the assessee for the impugned assessment year. Being aggrieved of the said order of assessment, the assessee preferred an appeal before the CIT (A). The CIT (A) also sustained the disallowance. 5. The learned AR submitted befo....
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....the source code of the software and the question of replicating/re-producing the software does not arise. It was submitted that in the aforesaid circumstances, the payment made to the Associated Enterprises (AE) cannot be considered to be royalty. In this context, the learned AR referred to clauses 14.4 of OECD commentary to stress upon the fact, when there is distribution of software on back to back basis, there is no requirement to deduct tax at source. In this context, the learned AR relied upon a decision in case of CIT vs. Dynamic Vertical Software India Private Limited (332 ITR 222). It was further contended by the learned AR that neither the Assessing Officer nor the CIT (A) have considered the facts and materials placed before them ....
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....e. It is further contention of the assessee that the provision contained u/s 9(1)(iv) read with Article 12(3) of the India-US DTAA makes it clear that only a payment for the right to use any copy right can be treated as payment for royalty. 8. It is a fact that the Hon'ble Delhi High Court in case of CIT vs. Dynamic Vertical Software India P. Ltd (supra) has held that in case of payment towards purchase and sale of software by an assessee who acted merely as a dealer cannot be termed as royalty so as to require deduction of tax at source u/s 40(a)(i) of the Act. However, the assessee is required to establish the fact on record by producing supporting evidence that it was merely a distributor of software to the Indian customer by pro....