TaxTMI 
TaxTMI 
2005 (8) TMI 33
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....ness Solutions Private Limited ('HBSPL') is a company incorporated under provisions of the Companies Act, 1956 having its registered office at S-85, Greater Kailash Part II, New Delhi-110048. Microsoft Regional Sales Corporation, Singapore ('MRSC') is a non-resident company, having its registered office at 4388, Alexandra Road, #04-09/12, Singapore-119968. MRSC had entered into a Solution Provider Agreement ('SPA') vide agreement dated: July21, 2005 with HBSPL for supplying packaged business software solutions. The product is delivered in physical form through a compact disc accompanied by a software license key which is delivered electronically through e-mail over the internet. The software license key that is purchased from MRSC alw....
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....he cases of Lucent Technologies and Samsung Electronics Company Ltd. in its submission. The company has further stated that its agreement with MRSC is without any copyrights and it grants only distribution rights. Therefore, the remittance made by the company to MRSC does not require withholding of taxes. The claim of the assessee does not appear to be correct. From a perusal of the agreement enclosed by the company, it is seen that it can make copies of the software purchased from MRSC by taking prior permission from MRSC {as per clause 4.9 of Solution Provider Agreement (SPA)} and further the company can customize the softwares for its clients according to their need. (ii) As the company can make copies of the software with permiss....
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....e 5(a). Thereby, not giving HBSPL any right to commercially exploit the product. The term royalty under Explanation 9(1)(vi) of the Income Tax Act, 1961 means that the transfer of all or any right (including the granting of license) in respect of a patent, invention, model, design, secret formula or process or trademark or similar property. The Income Tax Appellate Tribunal ('ITAT') has in a catena of cases laid down that the buyer of a software is liable to pay royalty only when the copyright is transferred to it." During the course of oral hearing it was contended by the learned counsel that withholding of taxes are not applicable to the present transaction since import of the 'CD' and the 'Key' does not confer copyright o....
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....) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force." A plain reading of the sub-section shows that any person responsible for paying to a foreign company (i) any interest; or (ii) any other sum chargeable under the provisions of the Act (except salary) is required to deduct income-tax at the time of credit of such sum to the account of the payee or at the time of actual payment thereof, whichever is earlier. The expression "any other sum chargeable under the provisions of this Act" would mean a sum on which income-tax is leviable. In other wo....
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....g officer that such sum would not be chargeable to tax in the case of the recipient, or for determination of the appropriate proportion of such sum so chargeable, or for grant of certificate authorizing the recipient to receive the amount without deduction of tax, or deduction of income-tax at any lower rates or no deduction. On such determination, tax at the appropriate rate could be deducted at the source. If no such application is filed, income-tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such "sum" to deduct tax thereon before making payment. He has to discharge the obligation of tax deduction at source. The High Court of Calcutta considered and interpreted ....