2019 (5) TMI 681

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....umstances of the case and in law the learned CIT(A) erred in confirming the disallowance of expenditure Rs. 32,35,518/- by the Dy. Commissioner of Income tax Circle 3, Pune without appreciating the facts of the case and prevailing law. The appellant hereby prays your honour that the claim of expenditure may be allowed. 3. The issue raised in the present appeal is against disallowance of expenditure of Rs. 32,35,518/- under section 40(a)(i) of the Act. 4. Briefly, in the facts of the case, the assessee was engaged in software development. The case of assessee was picked up for scrutiny. The Assessing Officer noted that the assessee had made payment of Rs. 32,35,518/- to GFG Gorup Ltd., New Zealand for purchase of software. The Assessin....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....TAAs. 8. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 9. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is whether the deduction claimed by assessee on purchase of licensed software is to be allowed as deduction in the hands of assessee or not. The Revenue authorities were of the view that purchase of licensed software by the assessee is akin to royalty and the assessee was duty bound to deduct tax at source. Since the assessee has failed to deduct tax at source, expenditure was disallowed in the hands of assessee. In this regard, the CIT(A) had placed reliance on the ratio laid down by Pune Bench of Tribunal in the....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....1)(vi) of the Act. Where the assessee did not acquire any copyright in the software, is not covered under Explanation 2 to section 9(1)(vi) of the Act. We further hold that amended definition of 'royalty' under the domestic law cannot be extended to the definition of 'royalty' under DTAA, where the term 'royalty' originally defined has not been amended. As per definition of 'royalty' under DTAA, it is payment received in consideration for use or right to use any copyright of literary, artistic or scientific work, etc.; thus, purchase of copyrighted article does not fall in realm of 'royalty'. We also hold that since the provisions of DTAA overrides the provisions of Income Tax Act and are more beneficial and the definition of 'royalty' havi....