TaxTMI 
TaxTMI 
2019 (4) TMI 308
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....e assessee as assessee in default for certain remittances outside India and confirming the observations of the AO in this regard. 2. In holding that order u/s 201 and 201(1A) was passed in time when the notice was issued after the expiry of the four years from the end of the relevant financial year. 3. In holding that payments made for the use of software are taxable as royalty both under Income-tax Act and the respective DTAA. 4. In confirming the demand of tax and interest raised by the learned AO in respect of payments towards use of software of Rs. 2,07,27,052/- and Rs. 80,66,684/-. 5. In confirming that data base access charges are taxable as royalty and appellant ought to have deducted TDS thereon and confirming that charge of tax and interest on the payments of Rs. 53,00,934/-. 6. In confirming that payment of Rs. 57,03,584/- as consultancy fees as fees for technical services under Income-tax Act and under DTAA and hence liable to tax and interest. 4. The Revenue in ITA No.2182/PUN/2014 has raised the following grounds of appeal:- 1. On the facts and circumstances of this case, the Ld. CIT(A) was not correct in deleting the additions made on account of grossing ....
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....e and hence, the same does not require any adjudication. The second issue raised by the assessee is against maintainability of the order passed under section 201(1) and 201(1A) of the Act after expiry of four years from the end of the relevant financial year. The issue in grounds of appeal No.3 and 4 is against orders of authorities below in holding that the payments made for use of software were taxable as royalty both under the Income Tax Act and respective DTAA and consequently, raising demand under section 201(1) and interest under section 201(1A) of the Act. In grounds of appeal No.5 and 6, the assessee has raised the issue against finding of authorities below in holding that data base access charges were taxable as royalty and the assessee should have deducted tax at source and further holding the payment of consultancy fees as 'Fees for Technical Services' under the Income Tax Act and under DTAA. 9. The learned Authorized Representative for the assessee pointed out that the issue of payment of software whether royalty or not, is covered by the order of Tribunal in assessee's own case in earlier years for assessment years 2008-09 and 2010-11. He also pointed out that Explana....
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....one South Ltd. Vs. DDIT (TS-173-HC-2014)(Kar). Hence, the CIT(A) held that payments made for software licenses were taxable both under the Income Tax Act as well as under DTAA. As far as taxability of payments made for use of third party software was concerned, wherein the case of assessee was that it was reimbursement and hence, not taxable, wherein the payment was not made to software license supplier but to the intermediary who in turn, had made the payments to software supplier. The CIT(A) held that the situation does not affect the TDS liability and it was held that for non deduction of tax at source out of such payments made for reimbursement of software expenses, order of Assessing Officer was upheld with respect to payments totaling Rs. 2.07 crores. 12. On different aspects, we find that we have already decided the said issue with elaborate deliberations in John Deere India Pvt. Ltd. Vs DDIT (International Taxation) in ITA Nos.905 to 908/PUN/2015, relating to assessment years 2007-08 and 2008-09, order dated 23.01.2019 and have held that there is no merit in holding the payments for software as royalty, which in turn, attracts the provisions of section 201(1) and 201(1A) o....
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....t is thus, cancelled." 13. Applying the said proposition to the facts of present case, we hold that the payments made by assessee for use of software were not taxable as royalty and hence, the assessee has not defaulted in not deducting tax at source out of such payments. Consequently, there is no merit in raising the demand under section 201(1) of the Act and charging interest under section 201(1A) of the Act. 14. Coming to the next issue raised i.e. payments towards subscription charges / fees for use or access to database or portal also do not fall within the definition of 'royalty' on the same simile that the definition of 'royalty' under DTAA had not undergone any change. Hence, there is no merit in holding the aforesaid payments as liable to deduct tax under section 201(1) of the Act and consequently, the assessee has not defaulted in not deducting the tax out of such payments. Hence, the demand created under section 201(1) of the Act and interest charged under section 201(1A) of the Act is cancelled. Similarly, the payments made for purchase of hardware totaling Rs. 80,66,684/- cannot be held to be royalty. The said amount was held to be liable to tax as royalty by the aut....