2017 (1) TMI 1102

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ied in holding that the provisions of Tax Deducted at Source will not be applicable in the asessee case by overlooking the provisions of explanation 2, 4 and 5 to section 9[1][vi] of the Income Tax Act, 1961. (2) Whether on the facts and in the circumstance of the case the Tribunal was correct in deleing the disallowance u/s.40(a)(ia) without considering that the payments were in the nature of Royalty subject to TDS under section 194J" 2. The admitted facts are as follows:- [a] The assessee / respondent is a dealer in Computer Software, having purchased the same from various companies such as Redington India Limited, Ingram Micro [India] Limited etc. In the course of assessment, a dis-allowance was effected in terms of ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....able by AutoDesk. The above principal company has appointed companies like Redington, Ingram Micro as distributors. The assessee company procures orders for the AutoDesk authorised produces from the end users and place back to back orders on the distributors for supply of customized software meant only for that particular customer. The software, bought from the Resident distributors, being customized for the end users who has placed orders on the assessee company it cannot be unsed by another customer or by the assessee company. The right to use the software lies absolutely with the end use only the assessee company does not acquire any right in the software whatsoever whether to use, modify, download or install. The agreement betw....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he owner for permitting another to use the property ; the amount reserved or the rental to be paid the original owner of the whole estate." 5. The Madras High Court in CIT Vs. Neyveli Lignite Corporation Ltd., reported in 243 ITR 458 states thus explaining the concept of Royalty:- "The term 'royalty' normally connotes the payment made by a person who has exclusive right over a thing for allowing another to make use of that thing which may be either physical or intellectual property or thing. The exclusivity of the right in relation to the thing for which royalty is paid should be with the grantor of that right. Mere passing of information concerning the design of a machine which is a tailor-made to meet the requirement o....